August US CPI Report May Decide Fed Rate Hike Fate

The US Consumer Price Index (CPI) report for August will be released on September 11, and it could have significant implications for interest rates. According to City Index UK, a core CPI reading that rounds to 0.3% month-over-month or an unrounded reading above 0.20% would signal that inflation is not slowing sufficiently, potentially prompting the Federal Reserve (Fed) to raise interest rates next week.

Fed member Christopher Waller recently suggested that a cooler CPI reading could lead him to hold rates steady, while a hot reading could support a hike. The Fed technically focuses on Core Personal Consumption Expenditures (PCE), but traders closely watch the CPI report due to its earlier release and significant impact on market expectations.

The US Dollar Index (DXY) is showing signs of a potential near-term bottom after testing 98.50 support, hinting at a turn higher if the CPI report comes in hotter than anticipated.