August CPI Meets Forecast; Stocks Rebound
August CPI matched forecasts on Sept. 11 and easing oil prices helped U.S. stocks rebound as traders refocus on the Sept. 15-16 Fed rate decision.
KEY TAKEAWAYS
- August CPI matched forecasts, rising 0.4% month-over-month and 3.4% year-over-year.
- Core CPI rose 0.3% month-over-month and 2.4% year-over-year, remaining above the Fed's 2% goal.
- As the final inflation input before Sept. 15-16, the Fed rate decision is the near-term market focus.
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The August Consumer Price Index (CPI) report, released by the Bureau of Labor Statistics on Sept. 11 at 8:30 a.m. ET, matched economists’ forecasts. As oil prices eased from recent levels above $100 per barrel, U.S. equities reversed earlier losses while traders refocused on the Federal Reserve’s Sept. 15–16 meeting.
August CPI and Market Response
The BLS reported that headline CPI rose 0.4% month-over-month and 3.4% year-over-year in August, aligning with consensus expectations. Core CPI, which excludes food and energy prices, increased 0.3% month-over-month and 2.4% year-over-year, slightly below July’s 2.5% annual rate but still above the Fed’s 2% target. Energy prices rose 2.1% for the month, with gasoline climbing 3.9%, accounting for more than one-third of the monthly CPI increase. Shelter costs rose 0.3%, food prices 0.1%, and “food away from home” increased 0.3%.
Energy prices surged above $100 per barrel in the days before the report amid U.S.–Iran war-related supply concerns, with Brent crude briefly reaching an intraday high near $109.98 before retreating to the low $100s. West Texas Intermediate (WTI) crude traded near $100. This energy shock heightened inflation fears, pushed bond yields higher, and pressured equities.
On Sept. 10, U.S. stocks declined as crude topped $100, extending a four-session losing streak amid rising yields and increased bets on Fed rate hikes. After the CPI release and the retreat in oil prices on Sept. 11, major U.S. indices rebounded, with the Dow gaining roughly 400–500 points and the S&P 500 and Nasdaq posting similar percentage increases. Fund-flow data showed about $40 billion in large-cap equity outflows during the risk-off period, concentrated in some index ETFs such as VOO and QQQ, indicating selective rather than broad selling. Investors appeared to look past some of the hotter core inflation details once energy pressures eased, limiting the immediate market reaction to the inflation report.
The Federal Open Market Committee (FOMC) will meet Sept. 15–16, issuing a policy statement at 2 p.m. ET on Sept. 16 followed by a press conference at 2:30 p.m. ET. The Fed has held the federal funds target range at 3.50–3.75% through earlier meetings in 2026. A 25-basis-point increase at this meeting remains a live option, with market-based tools assigning roughly a 57–73% probability of a hike before or around the Fed meeting. Because the August CPI is the final major inflation input before the FOMC, the rate decision has become the central near-term market event. Markets remain highly sensitive to energy prices, bond yields, and geopolitical developments tied to the U.S.–Iran conflict.
