August Inflation Data Sets Stage for Fed Rate Decision
US inflation is expected to remain flat at 3.4% year-over-year, but a potential Federal Reserve rate hike looms as crude oil prices surge past $100 per barrel.
The US Consumer Price Index is projected to show inflation held steady at 3.4% year-over-year for August. Month-over-month, prices are expected to rise by 0.4%. Core inflation, which excludes food and energy, is forecast to increase by 0.2%.
These figures may not reflect current market conditions. US crude oil exceeded $100 per barrel on Thursday. International Brent crude surpassed $107. This spike occurred after prices traded in the low $80s in mid-August.
Fed Officials Watch Price Signals
Federal Reserve Governor Christopher Waller stated he would consider a rate hike if inflation data proves strong. He noted recent data suggests signs of disinflation. If these signals continue, he is inclined to keep rates unchanged.
Fed Chair Kevin Warsh described the labor market as stable. He identified prices as a more concerning factor. At the Jackson Hole symposium, he warned that underlying trends have not meaningfully improved despite better-than-expected readings.
Labor Market Remains Resilient
The US economy added 162,000 jobs in August. This figure exceeded market expectations. The report also included positive upward revisions for June and July. This stability suggests a rate hike would not disrupt job growth.
Affordability Pressures Intensify
The national average price of gasoline reached $4.27 on Thursday. This represents a 44% increase since the war with Iran began on February 28. Mortgage rates hit 7.07% on Thursday.
The 10-year Treasury yield rose to its highest level since 2007. The Bureau of Economic Analysis reported producer prices rose at a 5.4% annual rate in August. KPMG chief economist Diane Swonk noted this data covers a period prior to the recent oil surge. According to GN markets/inflation (en-US), the September FOMC meeting fate lies with this report.
