Fed Rate Hike Odds Rise as US Inflation Accelerates

The US Consumer Price Index (CPI) accelerated in August, rising by 0.4% after a 0.1% increase in July, according to the Labor Department's Bureau of Labor Statistics.

This uptick in inflation is expected to push the Federal Reserve closer to raising interest rates next week, with financial markets initially pricing in a 91% chance of a quarter-point rate hike before settling back to 87%.

The core CPI, which excludes food and energy prices, rose by 0.3% last month, its largest increase since April, driven by a 5.9% jump in mobile phone costs and a 2.7% rise in airline fares.

Economists expect the Personal Consumption Expenditures (PCE) price index to follow suit, with estimates converging around a 3.4% year-on-year increase in core PCE inflation.