The Federal Reserve may be disappointed! The US core CPI accelerated on a monthly basis, causing the US dollar and US bond yields to rise.
Due to the core CPI monthly rate not being able to record 0.2% for the third consecutive month, but instead rising to 0.3%, this is undoubtedly disappointing for the Federal Reserve. It indicates that the Federal Reserve may still raise interest rates later this year.
On Wednesday, the US released CPI data for August, which showed that overall CPI in the US rose again, while core CPI continued to decline.
After the data was released, the US stock market remained relatively stable, the US dollar strengthened, and US bond yields rose.
US overall inflation exceeds expectations
The unadjusted year-on-year CPI for August in the US recorded 3.7%, higher than the expected 3.60% and the previous value of 3.20%. This is the highest level since May this year and the second consecutive increase.
The unadjusted year-on-year core CPI for August in the US recorded 4.3%, in line with expectations of 4.30%, and lower than the previous value of 4.70%. This is the lowest level since September 2021 and has been declining for six consecutive months. It is in line with expectations and represents the smallest increase in nearly two years.
The seasonally adjusted month-on-month CPI for August in the US recorded 0.6%, reaching a new high since June 2022. This is in line with expectations of 0.60% and higher than the previous value of 0.20%.
The month-on-month core CPI for August in the US was 0.3%, higher than the expected 0.20% and the previous value of 0.20%. This is the first acceleration in six months.
The unadjusted year-on-year inflation rate for used cars and trucks in August in the US was -6.6%, lower than the previous value of -5.6%. The unadjusted year-on-year inflation rate for new cars in August in the US was 2.9%, lower than the previous value of 3.5%.
The unadjusted year-on-year inflation rate for housing in August in the US was 7.3%, lower than the previous value of 7.7%.
US dollar strengthens, US bond yields rise
US Treasury yields rose after the CPI data was released, with the 10-year yield rising by 7.20 basis points to 4.336%.
The 2-year US Treasury yield rose by 4 basis points to 4.314%.
After the release of the CPI data, the US dollar index (DXY) rose by more than 20 points in the short term and is now at 104.98.
Spot gold fell by nearly $9 in the short term and is now at $1906.49 per ounce.
Futures for the three major US stock indexes remained relatively stable.
Probability of Fed maintaining stability in September slightly decreased
Economists believe that core indicators are more reflective of underlying inflation than overall CPI. According to data from the Bureau of Labor Statistics, gasoline costs accounted for more than half of the overall CPI increase in August.
After the release of the CPI data, the probability of the Fed maintaining interest rates unchanged in September decreased to 91%.
According to CME's "Fed Watch": The probability of the Fed maintaining interest rates unchanged at 5.25%-5.50% in September is 91%, while the probability of a 25 basis point rate hike to the 5.50%-5.75% range is 9%.The probability of keeping interest rates unchanged until November is 56.1%, the probability of cumulative rate hikes of 25 basis points is 40.4%, and the probability of cumulative rate hikes of 50 basis points is 3.4%.