August CPI Rises 0.4% as Expected, but Core at 0.3% Lifts September Fed Hike Odds to About 90%

The Bureau of Labor Statistics reported Friday that the August consumer price index rose a seasonally adjusted 0.4% for the month, matching the Dow Jones consensus, with the 12-month increase at 3.4%. But underneath the headline number, core CPI, which strips out food and energy, posted a 0.3% monthly gain, or 0.1 percentage point above forecast, even as its annual rate of 2.4% matched estimates, according to CNBC. The firmer core reading reshaped trader expectations for next week's Federal Reserve meeting, CNBC reported.

Energy and Gasoline Lead the Gain

Energy did the heavy lifting on the headline print. Gasoline prices jumped 3.9% for the month, accounting for more than one-third of the index's overall gain, while the broader energy index rose 2.1% and was up 16.3% from a year earlier, CNBC reported, attributing the pressure to escalating tensions in the Middle East. Seeking Alpha similarly described Americans as feeling "the burn at the pump" in August as energy costs tied to the Middle East conflict continued to drive inflation, even as grocery and clothing prices flatlined.

As our calculation shows, the gap between the annual energy index (16.3%) and the annual food index (2.7%) works out to 13.6 percentage points, a 503.7% relative difference (16.3 minus 2.7, divided by 2.7, times 100) — illustrating how lopsided the inflation pressure was across categories tracked in the same report.

Shelter, Vehicles and Services Also Firmed

Food prices edged 0.1% higher for the month as food-at-home costs held flat, with the food index up 2.7% annually, per CNBC's reporting. Shelter costs climbed 0.3%, a reacceleration after moderating over the prior two months. Transportation services rose 0.5%, used cars and trucks gained 0.4%, and new vehicle prices were up 0.3% — part of what CNBC described as broad-based gains for the index.

Fed Hike Odds Jump to 90%

The report is the final major inflation indicator the Fed will see before its policy meeting next week, which concludes Wednesday with a vote on its key interest rate, CNBC noted. Heading into the release, markets were already pricing in a nearly 70% probability of a quarter-point hike. After the print, odds jumped to about 90% on the CME Group's FedWatch tracker of fed funds futures, CNBC reported — a 20 percentage point increase by our calculation (90 minus 70). The fed funds rate, a benchmark for multiple consumer loans, has been pegged in a range of 3.5% to 3.75% for all of 2026, according to CNBC.

CNBC's Jim Cramer separately described the odds of a hike next week as "pretty much a lock" in his rundown of market-moving items for the day.

What Officials and Economists Said

Fed Chairman Kevin Warsh has expressed a commitment to returning inflation to the Fed's 2% target and said recently that if the numbers don't improve, "we have work to do," comments CNBC said were widely interpreted as advocating a rate hike, though it noted several key officials have counseled a more patient approach in recent weeks.

Kathy Bostjancic, chief economist at Nationwide, told CNBC that "Chair Warsh and others signaled that interest rates can remain on hold only if disinflation continues and today's August report did not deliver that." She added that "the renewed march higher in oil, gasoline and diesel prices add to concerns that higher energy prices could spill over to other goods and services and inflation expectations." Nationwide, per Bostjancic's comments to CNBC, now expects a quarter-point hike next week. CNBC also noted that ahead of the release, some observers speculated the FOMC's decision could come down to hundredths of a percentage point in the CPI reading.

Markets React: Stocks Higher, Oil Softer, Yields Elevated

Equities rallied on the in-line headline figure. The S&P 500 rose 0.9%, the Dow gained 1%, and the Nasdaq Composite added 0.8%, according to Seeking Alpha, which noted the S&P 500 and Nasdaq were looking to snap a four-session losing streak. CNBC's Cramer, in his market-watch column, said bond yields were flat but remained elevated on the session.

Cramer also flagged that oil was lower on the day even though WTI remained near $100 per barrel and Brent was at $104 — putting Brent about $4 above WTI by our calculation (104 minus 100) — and cited an International Energy Agency projection, as summarized in his column, that global oil supply will fall 5.7 million barrels a day in 2026, down 6% from last year versus a prior forecast of a 4% decline. Separately, Cramer noted that 30-year fixed-rate mortgage loans have moved above 7%, a sign he said rising rates are starting to crimp housing.

Bottom Line

The headline CPI print landed where economists expected, but the 0.1-percentage-point core beat, paired with gasoline's 3.9% jump and gains in shelter, vehicles and transportation services, was enough to push CME-tracked hike odds from a nearly 70% probability to about 90% ahead of next week's Fed decision, according to CNBC. Nationwide now expects a quarter-point hike, per Bostjancic's comments to CNBC, and CNBC's framing of Fed Chairman Kevin Warsh's recent remarks was that they were widely interpreted as advocating a hike, even as several officials have counseled patience. The FOMC's vote is due Wednesday.