Federal Reserve rate hike depends on two key inflation reports

Two numbers are about to do a lot of heavy lifting. The Federal Reserve’s September policy decision is riding on inflation data landing September 10 and 11, just days before officials convene for their FOMC meeting on September 15-16. If those figures come in hot, the central bank may have little political cover to stay on hold. Fed Governor Christopher Waller has said explicitly that August inflation readings will influence whether the Fed moves on rates. What the data will show, and why it matters First up is the producer price index for August, due September 10, with consensus expecting a monthly gain of 0.4%. A day later, the consumer price index arrives, with forecasters projecting the same 0.4% monthly increase and a year-over-year reading of 3.4%. Think of PPI as a leading indicator: when costs rise at the factory and wholesale level, they tend to filter through to the prices consumers pay weeks later. CPI is the more publicly visible number, but the Fed’s actual preferred gauge is the personal consumption expenditures index, which pulls from both reports. That PCE figure is the one doing the most damage to the Fed’s credibility right now. Headline PCE came in at 3.7% year-o...