Federal Reserve's Inflation Forecast Sets Up Collision Course for FOMC Meeting

The Federal Reserve Bank of Cleveland released its August inflation forecast, which could put the Federal Open Market Committee (FOMC) on a collision course ahead of its September meeting. After cooling in June, inflation is expected to grow again in July and August.

The extent of the growth, or lack thereof, could make an already fractured FOMC even more divided. The committee's July meeting was marked by dissent, with three members voting for a rate hike, while Fed Chair Kevin Warsh made conflicting statements during his post-meeting press conference.

Ahead of the September meeting, employment and inflation data will be crucial. According to the Federal Reserve Bank of Cleveland's Inflation Nowcasting estimates, July CPI is expected to rise 0.09% for the month and be up 3.42% year over year, while core CPI is projected to have risen 0.21% in July and up 2.52% year over year.

Core PCE, the Fed's preferred gauge of inflation, is expected to come in a little hotter, up nearly 0.3% in July after rising 0.1% in June. The August CPI report is expected to be published on September 11, but the August PCE report will not be available until after the FOMC meeting.