August consumer inflation cements Fed rate hike odds. What Wall Street is saying
The print was enough to raise chances of a quarter-point Fed rate increase next week to nearly 86% from 72% on Thursday, according to the CME FedWatch tool.
TL;DR
- August's consumer price index rose 0.4% month-over-month and 3.4% year-over-year, meeting consensus.
- Core inflation, excluding food and energy, rose 0.3% month-over-month, exceeding estimates.
- The odds of a Federal Reserve quarter-point rate increase next week rose to nearly 86%, up from 72%.
- Wall Street analysts largely believe the data supports a Fed rate hike next week, citing sticky inflation and the Fed's 2% target.
- The bond market, specifically the 2-year Treasury yield, reflected expectations of a rate hike, reaching multi-year highs.
- Equities, however, rallied as oil prices pulled back, indicating investor preparation for a Fed hiking cycle.