The rebound in gasoline prices pushes up the US CPI, and expectations of the Fed's interest rate hike next week are further heating up

The Zhitong Finance App learned that the US Department of Labor Statistics announced on Friday that as gasoline prices rebounded after falling for two consecutive months, the US Consumer Price Index (CPI) accelerated rise in August, which strengthened the financial market's expectations that the Federal Reserve may raise interest rates next week. The consumer price index rose 0.4% month-on-month last month, in line with expectations, while in July it only rose slightly by 0.1%; the year-on-year increase was 3.4%, the same as expected, and the increase was the same as in July.

After deducting volatile food and energy components, the core CPI rose 0.3% month-on-month, while both the expected value and the previous value were 0.2%. Core CPI rose 2.4% year on year in August, in line with expectations, but moderated from the 2.5% increase in July.

Data released on Thursday showed that the producer price index (PPI) rose in August, with several key components influencing PCE's inflation calculations rising strongly. Coupled with the strong employment report for August released last week, it has further boosted the possibility of interest rate hikes next week.

Earlier, Federal Reserve Governor Christopher Waller (Christopher Waller) said last week that if the data confirms that inflationary pressure is cooling down, he is inclined to support keeping interest rates unchanged, which at one point reduced the probability of raising interest rates.

The price of crude oil rose again to above $100 per barrel on Thursday, while the price of diesel hit a record high, which indicates that inflation will remain high and expand further.

Some economists believe that price pressure will continue due to the imposition of tariffs on imported goods (recently Canada, one of America's largest trading partners).

Public dissatisfaction with high prices (especially gasoline and food) led to a sharp decline in President Donald Trump's approval ratings, and could cause his Republican Party to lose control of the US Congress in November's midterm elections.

After the PPI data was released on Thursday, economists' predictions for the August core PCE price index ranged from 0.15% to 0.28%, with core PCE increasing 0.2% month-on-month in July. The forecast for a year-on-year increase in the core PCE inflation rate is between 3.2% and 3.3%, with an increase of 3.3% in July.

The August PCE inflation report will include methodological adjustments, which some economists say may reduce the core inflation rate by several basis points.

According to the Chicago Mercantile Exchange (CME) FedWatch tool, before the CPI report is released, the financial market expects the probability that the Federal Reserve will raise interest rates by 25 basis points at the September 15-16 policy meeting to be about 70%. The Federal Reserve's current benchmark overnight interest rate range is 3.50%-3.75%.

Federal Reserve Chairman Kevin Walsh said last month that the central bank “still has work to do” if policymakers cannot gain confidence that the inflation rate is falling to 2%.

However, Trump is pressuring the Federal Reserve to cut interest rates. He wrote on social media last week: “Lower interest rates or I will stop trading with countries that have trade deficits.” Economists blame this so-called “political intimidation” for the sharp rise in long-term US Treasury yields. Some people expect the Federal Reserve to tighten monetary policy next week to show its independence.