The upcoming US CPI report will provide insights into potential tariffs passthrough on prices. Core CPI figures are a key focus, with a consensus expectation of +0.3% m\/m for August, mirroring July’s data. Drilling into more precise figures, August’s core CPI is estimated at +0.32% m\/m, similar to the July report.<\/p>\n
On an annual basis, core CPI is anticipated to be +3.1% y\/y for August, closely aligned with July’s revised forecast of +3.06% y\/y. The previous acceleration in core prices was largely attributed to a rise in service costs, rather than goods, offering some market relief regarding tariff impacts. Energy prices, impacted by base effects, are expected to rebound, with predictions of a 0.8% increase after a 1.1% decline in July. Food prices are also projected to rise.<\/p>\n
Core goods prices are significant, with MNI forecasting a +0.30% m\/m increase, up from July’s +0.21% m\/m. Markets are weighing the necessity of a 50 bps rate cut, contingent on inflation figures deviating significantly from expectations. By year-end, there’s an estimation of 68 bps in rate cuts, yet higher-than-expected inflation could alter these forecasts. The CPI results will influence the Fed’s communication strategy for next week’s decisions.<\/p>\n
With the August CPI report due later today, September 11, 2025, the key detail we are watching is the pass-through from recent tariffs. The market consensus is for core prices to rise by 0.3%, but the real story will be whether this is driven by goods or services. A hot number in core goods would signal that inflation could become a bigger problem.<\/p>\n
This comes after the Producer Price Index we saw yesterday showed a 0.5% jump in input costs for finished goods, the highest since March. This recent data suggests companies are facing higher costs, making it more likely we see a higher core goods reading in today’s report. For traders, this raises the odds that the Fed will be less aggressive with rate cuts later this year.<\/p>\n
We should watch the December 2025 Fed Funds futures contracts very closely following the release. The market is currently pricing in about 68 basis points of cuts by year-end, but a strong inflation print could quickly see that repriced to only 50 basis points. That would mean the market no longer expects a third rate cut after the September and October meetings.<\/p>\n
We learned from the stubborn inflation of 2022 and 2023 that the Fed is hesitant to cut rates when price pressures are building. Even though a 25 basis point cut next week seems guaranteed, a hot CPI report would give the central bank a reason to signal a “wait and see” approach for future meetings. This would temper expectations for a more aggressive easing cycle.<\/p>\n
In the options market, we’re seeing an increase in the cost of protection against a market downturn. Implied volatility on short-term S&P 500 options has risen to a four-week high of 15.2%, showing that traders are preparing for a significant market move. A higher-than-expected CPI reading would likely cause a sell-off in equities as hopes for deeper rate cuts diminish.<\/p>\n
On the other hand, if core goods prices come in soft again, it would reinforce the idea that the tariff impact remains muted for now. This would be the green light for the market to begin pricing in higher odds of a 50 basis point cut next week. Such a scenario would likely see bond yields fall and tech stocks lead a broad market rally.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" Markets await August CPI; core inflation steady, services drive gains, energy rebounds, Fed\u2019s rate path in focus.<\/p>\n","protected":false},"author":62,"featured_media":17022,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-30599","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/30599","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/users\/62"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/comments?post=30599"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/30599\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media\/17022"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media?parent=30599"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/categories?post=30599"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/tags?post=30599"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}