CPI Preview: Sticky Inflation Could Shake Rate-Cut Hopes When Latest US CPI Drops

Consumer Price Index due today, markets braced for inflation surprise vs Fed expectations

The U.S. Consumer Price Index (CPI) report is set for release today, and economists forecast headline inflation to rise 0.3% month-over-month in August, with core CPI (excluding food and energy) likely matching that at +0.3%. Year-on-year figures are expected to show inflation around 2.9%, up from 2.7% in July.

What To Look For in Today’s CPI Data

• Whether monthly inflation accelerates: a 0.3% gain would signal increasing price pressures, especially from goods and energy.
• Core inflation’s trajectory: matching or exceeding forecasts would suggest sticky inflation, possibly weakening confidence in upcoming rate cuts.
• Impact of tariffs and supply chains: economists warn that costs passed through from trade restrictions are creeping into consumer goods prices.

How Markets Might React

• Federal Reserve policy risks: If inflation comes in hotter than expected, the Fed may delay or scale back anticipated rate cuts. Bond yields would likely rise, especially on the 10-year U.S. Treasury.
• Equity volatility: Growth and tech sectors are particularly sensitive to interest rate expectations. Soft inflation might boost stocks; surprises on the high side might trigger pullbacks.
• Safe-haven demand: Inflation surprises often push investors toward gold, the dollar, or Treasuries as defensive plays.
• Currency moves: A strong CPI could strengthen the USD versus major peers, tightening pressure on import-sensitive multinational companies.

Risks That Could Upset Expectations

• Overly strong goods inflation from tariff pass-through or rising energy costs.
• Labor cost pressures or services inflation exceeding forecasts.
• Surprises in inflation expectations among consumers, which could feed into wage demands.