CPI inflation report pumps the brakes on big Fed rate cut bets

Updated at 9:20 AM EDT

U.S. inflation pressures eased notably last month, data indicated Wednesday, but core prices held steady, suggesting the Federal Reserve will likely wait and notice in lowering borrowing costs into the autumn months and beyond.

The Commerce Department said its headline Consumer Price Index for the month of August turned into pegged at an annual rate of two.5%, down from the two.9% % recorded in June. and the bottom since February of 2021.

On a monthly basis, price pressures edged zero.2% higher, thanks partly to a modest 2.6% per gallon decline in domestic gasoline prices.

So-also also known as core inflation, which strips out volatile components like food and energy, held at an annual rate of three.2% matching Wall Boulevard's three.2% forecast and pegged at the bottom rate in additional three years.

The monthly reading of zero.three% turned into just prior to Wall Boulevard forecasts and turned into up modestly from the final word July reading of zero.2%.

"The Fed is widely expected to cut rates by  25 basis points next week, and as of late’s more-or-less on-target CPI reading keeps that very tons in play," said Chris Larkin, managing director for trading and investing at E*Trade from Morgan Stanley.

"Which may perhaps disappoint those investors hoping for an even bigger cut, but with inflation seemingly under keep watch over, the markets will likely turn their focal point back to the industrial growth side of the equation—specially the employment picture" he added.

U.S. stocks extended declines following the data unlock, with futures tied to the S&P five hundred indicating a spot bell fall of around 22 points while those tied to the Dow Jones Industrial Average are priced for a 230 point pullback.

The tech-focused Nasdaq, meanwhile, turned into also also known as Eighty points lower.

Benchmark 2-year Treasury note yields jumped Eight basis points to a couple.652% while 10-year notes were pegged at three.668%.

The U.S. dollar index, which tracks the greenback against a basket of six global currencies, turned into marked zero.2% lower at one zero one.440.

The CME Group's FedWatch, meanwhile, suggests an Eighty five% chance that the Fed will lower its benchmark lending rate by 1 / 4 of a percentage point next week in Washington, up from around seventy one% earlier than the data unlock.

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