US Inflation Holds at 3.4% in August as Fed Rate Hike Expectations Grow
US inflation remained at 3.4% in August, meeting forecasts as markets brace for a potential Federal Reserve rate hike amid strong job growth and rising energy prices.
US Inflation Holds Steady at 3.4% in August
US inflation remained unchanged at 3.4% in August on an annual basis, matching economists' forecasts. In monthly terms, the consumer price index registered a 0.4% increase during the month, while core inflation, which excludes volatile food and energy items, rose at an annual pace of 2.4%. This compares to a 3.5% inflation rate in June and 3.4% in July, showing a slight cooling trend over the summer months.
Expectations Grow for Federal Reserve Rate Hike
Attention now shifts to the upcoming Fed interest rate decision next Wednesday, with markets pricing in a strong probability of a rate hike following a surprisingly robust August jobs report and rising energy prices driven by tensions in the Strait of Hormuz. Futures trading indicates a roughly 71% probability of an interest rate increase.
"A reading matching the consensus forecast would represent the fourth consecutive month of encouraging inflation data and ease the pressure for an interest rate hike by the Fed in September," said Christopher Hodge, chief US economist at Natixis CIB Americas.
Labor Market Resilience and Bond Yields Surge
Earlier in the month, data revealed that the US economy added 162,000 jobs in August, significantly surpassing expectations of just 53,000 new jobs. Meanwhile, the unemployment rate held steady at 4.1%, meeting forecasts. Adding to the tightening pressure, the yield on 10-year US Treasury bonds surged to nearly 5%, reaching its highest level since 2007.
