August CPI Report Set to Drive Interest Rate Decision

The US Consumer Price Index (CPI) report for August is set to be released today at 8:30 am ET, and its impact on stocks, bonds, the US dollar, and the Federal Reserve's decision-making process cannot be overstated.

This is the last major inflation print before the Fed's meeting in September, where they will decide whether to raise interest rates or hold them steady. The CPI report will give the Committee a final snapshot of consumer inflation before making their decision.

The consensus forecast is for headline inflation to rise by around 0.4% month-on-month and 3.3-3.4% year-over-year, while core CPI is expected to increase by about 0.2% month-on-month and 2.3-2.4% year-over-year.

Markets will be closely watching the composition of the report, particularly core goods versus core services, rents, owners' equivalent rent, airfares, insurance, used cars, and any factors that may influence the Fed's preferred Personal Consumption Expenditures (PCE) gauge later this month.