CPI Jumps Above Forecasts With 0.4% August Gain as Core Inflation Aligns With Projections

Version 1 – Balanced Market Wrap

U.S. inflation ran a touch hotter in August, briefly weighing on markets, but expectations for a Federal Reserve rate cut next week remain intact.

CPI rose 0.4% month-over-month versus a 0.3% forecast, with annual inflation at 2.9%. Core CPI held steady at 0.3% for the month and 3.1% year-over-year, in line with estimates.

Bitcoin eased 0.5% to $113,700 after the release, while U.S. stock futures clung to slight gains. The 10-year Treasury yield fell to 4.00%, gold climbed back into positive territory, and the dollar firmed modestly.

The inflation data was accompanied by a sharp rise in weekly jobless claims to 263,000, well above expectations. The mix of sticky inflation and a softening labor market underlines the Fed’s challenge. Traders now view a quarter-point cut as certain, while bets on a larger reduction have faded.

Version 2 – Fed-Centric Framing

The Federal Reserve’s policy dilemma deepened Thursday as inflation ticked above forecasts and jobless claims surged, leaving markets convinced a smaller rate cut is coming next week.

Headline CPI advanced 0.4% in August, exceeding projections, while core CPI remained steady at 0.3%. Year-over-year readings came in at 2.9% for CPI and 3.1% for core, matching estimates.

Markets reacted cautiously: bitcoin slipped, stocks lost momentum, and gold turned higher. Treasury yields tumbled as investors digested jobless claims of 263,000, a steep jump from the prior week and the highest in months.

While last week’s weak jobs and producer price data had stirred speculation of a 50-basis-point cut, the hotter CPI print appears to have closed that door. Futures now show near-unanimous expectation for a 25-basis-point reduction.

Version 3 – Quick Snapshot Style

August CPI rose 0.4% (est. 0.3%), with annual inflation at 2.9%. Core CPI stayed at 0.3% monthly and 3.1% annually, in line with forecasts.

Markets reacted mixed: bitcoin dipped 0.5% to $113,700, stock futures flattened, gold climbed, and the 10-year yield dropped to 4.00%.

Weekly jobless claims surged to 263,000 vs. 235,000 expected, highlighting growing labor market weakness.

Fed funds futures now overwhelmingly price a 25-basis-point cut next week, with odds of a half-point move evaporating.