Key US inflation data this week ahead of Fed rate decision

US inflation is once again in the spotlight this week. Producer prices (PPI) for August are published on Thursday, followed by consumer prices (CPI) on Friday. The figures arrive at a sensitive moment: next Wednesday, 16 September, the Federal Reserve will make a decision on interest rates. The market is currently pricing in a 60% chance of a rate hike.

In brief:

• The PPI for August is published on Thursday, with the CPI following on Friday.
• The market puts the chance of a rate hike by the Fed at 60%.
• The Fed’s interest rate decision follows on Wednesday 16 September.

What the figures show

The forecast for the monthly PPI in August stands at 0.4%, while the previous reading came in at 0.0%. On an annual basis, the PPI stood at 4.7% in August. Core producer inflation (Core PPI) is expected at 0.3% month on month, after a previous reading of 0.2%. On an annual basis, core PPI stands at 4.2%.

For Friday’s CPI, expectations on a monthly basis stand at 0.4%, after a previously measured 0.1%. On an annual basis, the forecast remains stable at 3.4%. Core CPI on a monthly basis is expected at 0.2%, in line with the previous reading. On an annual basis, core CPI comes in at 2.5%, slightly higher than the previous reading of 2.4%.

Market takes a critical view of the outcome

Whether the inflation figures will actually influence the Fed’s decision is not certain. Even so, investors will follow the data closely, according to analyst Daan of the account DaanCrypto on X.

According to the analyst, a rate hike is not his base case. He expects the Fed to move to a hike only if the data turns out extremely poor and a rate pause would damage the central bank’s credibility. Exactly how the inflation figures turn out, and how the Fed responds to them, will become clear in the course of this week.