US inflation exceeds forecasts and reinforces the likelihood of a new maxi-rate hike by the Fed. US inflation marks an annual + 8.3% in August compared to + 8.5% in July. The consensus was for a more marked slowdown to + 8.1%. The core component also jumped by 6.3% on an annual basis, strengthening compared to + 5.9% in July, over the estimated + 6.1%. “The fact that both core and core inflation have risen despite the drop in gasoline prices during the month illustrates the breadth and scale of the challenge that policy makers face to bring inflation back under control “, comments AllianceBernstein.
Each of the 3-, 6- and 12-month core inflation rates is above 6%. “Today’s figure is particularly shocking as it has been above expectations despite the decline in many of the typically volatile categories that can skew the overall reading: air fares, car rental and used car prices. This means that the underlying inflation rate was even higher in August than the numbers received this morning, ”adds AllianceBernstein who almost certainly gives a new rate hike of 75 basis points. “While the market may assume a 100 basis point hike, I don’t think the Fed will decide to do so, preferring instead to point out that it will not slow the pace of hikes until there is some moderation in inflation. It is clear that this has not yet happened and this means that further substantial increases (50 or 75 basis points) remain probable in the coming months ”.