Key Points
- US August CPI data was just released showing inflation decline to 2.5%.
- The results hint at the first rate cut since 2020 coming next week.
The US August CPI data is out, showing a dropping inflation to 2.5%, in line with economists’ expectations.
Here are the results after today’s official data:
- US CPI (MoM) for August: 0.2% vs previous 0.2% with an estimated 0.2%
- UC CPI (YoY) for August: 2.5% vs previous 2.9% with an estimated 2.5%
- US Core CPI (MoM) for August: 0.3% vs. previous 0.2%, with an estimated 0.2%
- US Core CPI (YoY) for August: 3.2% vs. previous 3.2% with an estimated 3.2%
US Fed Expected to Cut Rates Next Week
According to notes shared via X by The Kobeissi Letter, this marks the lowest annual inflation rate since March 2021. They note that the first rate cut since 2020 is coming next week.
The team also noted that this continues to feel like a pivotal time for the entire market and the economy. They highlight that even with the upcoming rate cuts in the US, heightened volatility is expected into year-end.
As the Financial Times notes, the inflation data marks one of the last major economic releases ahead of the Fed’s next meeting scheduled for September 18.
The meeting is expected to see the US Fed cutting interest rates from their current range of 5.25 to 5.5%, a 23-year high.
According to their data, after today’s release, the yield on two-year Treasury bonds, which tracks interest rate expectations and moves inversely to price, rose 0.08% points to 3.69%.
Contracts tracking the S&P500 share index were down 0.5% in the immediate aftermath of the inflation data publication, while those tracking the technology-heavy Nasdaq 100 also lost 0.5%.
On the other hand, the crypto market did not show any strong signs of volatility following today’s CPI data.
The US Fed has been seeking assurance that the inflation is cooling before lowering interest rate cuts. Their previously set rate for inflation was 2%, as the Financial Times notes.
