Fed rate hike odds surge to 90% after core inflation surprises to the upside

The Federal Reserve’s inflation fight just got a sequel nobody asked for. August’s core Consumer Price Index climbed 0.3% month-over-month, overshooting the 0.2% economists had penciled in, and the CME FedWatch tool responded almost instantly: the probability of a 25-basis-point rate hike at the September 16 FOMC meeting jumped to 90%, up from roughly 70% just 24 hours earlier. The numbers behind the panic The Bureau of Labor Statistics released the August CPI report on September 11, and the details weren’t kind to the rate-cut crowd. Core CPI, which strips out volatile food and energy prices, rose 2.4% on a year-over-year basis. Headline CPI was even more aggressive: 0.4% month-over-month and 3.4% year-over-year, both in line with forecasts but still uncomfortably elevated. Energy costs are a big contributor. Oil prices are creeping toward $100 per barrel, injecting persistent upward pressure into transportation, manufacturing, and virtually every supply chain that relies on fuel. The current Fed target range sits at 3.50% to 3.75%. If the FOMC hikes by 25 basis points next week, that range moves to 3.75% to 4.00%. From cuts to hikes: how expectations flipped Rewind to the start o...