Headline CPI Expected to Have Spiked Higher in August, but Core Rate Seen Slowing

The U.S. government on Wednesday morning will release its latest official inflation data.

Analysts will differ on the specific reasons, but surely high on the list are interest rates that give every indication of staying higher and for longer than most had anticipated.

While the Fed appears set to hold its benchmark fed funds rate steady at its policy meeting later this month, investor hopes that the central bank might begin considering cutting rates in the near future have dissipated thanks to continuing strength in the economy and inflation. Just a couple of months ago, market participants had been anticipating the first Fed rate cuts in late 2023. By a few weeks ago, those expectations shifted to early 2024. A check ofnow shows bets on the first cut rate having been pushed out to roughly one year from now.

Should it come to pass, tomorrow's decline in core CPI will be welcome to policymakers, but even a 4.3% inflation rate is more than double the Fed's 2% target. And central bankers will have a hard time claiming victory over inflation when consumers are watching prices at the pump advance with each fill-up.

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