Headline CPI for August was just 0.1% sending the year-over-year rate to 8.3% from 8.5% in July.
The Core measure of CPI disappointed to the upside, rising 0.6% in August versus the expected 0.3%.
The year-over-year Core number increased to 6.3% from 5.9%, which is a significant problem for the Fed.
The odds for a 0.75% hike next week were pushing 90% before today’s data; I imagine it’s closer to 100% now.
Market participants will now turn their eyes to the November Fed meeting. Before today’s inflation report, the odds for a fourth 0.75% hike were 14%. Anticipating another 0.75% hike in November could push risk assets lower.