US Inflation Complicates Fed’s Calculations Ahead of September Meeting

US inflation data for August showed a rise in market expectations for a 25-basis-point interest rate hike by the Federal Reserve; the probability of such a hike reached approximately 86.5% according to the "FedWatch" tool, compared to a 13.5% chance of rates remaining unchanged.

Annual inflation held steady at 3.4%, in line with forecasts, while the monthly Consumer Price Index (CPI) rose by 0.4%, driven primarily by a 3.9% increase in gasoline prices.

Conversely, annual core inflation slowed to 2.4%—its lowest level since March 2021—despite a 0.3% monthly rise. These figures reflect a mix of persistent inflationary pressures and a gradual improvement in core inflation, underscoring the importance of upcoming data in determining the trajectory of US monetary policy.