Fed Hikes to 90% as August CPI Surprises with 0.3% Jump

The Federal Reserve's inflation fight just got a major boost as August's core Consumer Price Index (CPI) rose by 0.3% month-over-month, exceeding economists' expectations of 0.2%. This unexpected increase has sent shockwaves through the market, with the CME FedWatch tool responding rapidly: the probability of a 25-basis-point rate hike at the September 16 FOMC meeting jumped to 90%, up from around 70% just 24 hours earlier.

The Bureau of Labor Statistics released the August CPI report on September 11, and the numbers weren't kind to the rate-cut crowd. Core CPI rose by 2.4% on a year-over-year basis, while headline CPI climbed 0.4% month-over-month and 3.4% year-over-year.

Energy costs are a significant contributor to this uptick in inflation, with oil prices creeping toward $100 per barrel. This persistent upward pressure is affecting transportation, manufacturing, and virtually every supply chain that relies on fuel.