Analysis: US August CPI accelerates, market rate hike expectations rapidly heat up

Odaily reports that due to gasoline costs rebounding after two consecutive months of decline, US consumer prices accelerated in August, reinforcing financial market expectations that the Federal Reserve may raise interest rates next week. The US Department of Labor's Bureau of Labor Statistics said on Friday that the consumer price index rose 0.4% month-over-month last month, following a modest 0.1% increase in July. Over the 12 months through August, consumer inflation rose 3.4%, unchanged from July's increase.

Thursday's data had already shown that the August producer price index rose, with several key components posting strong gains, and these components feed into the calculation of PCE inflation. This, combined with last week's strong August employment report, further boosted market expectations for a rate hike next week. After the release of the US August CPI data, the market estimated the probability of a Fed rate hike next week at about 90%.