The Bureau of Labor Statistics will release the August consumer price index report Friday at 8:30 a.m., the final piece of inflation data the Federal Reserve will have before its interest rate decision next week.
According to Dow Jones consensus estimates, the report is expected to show costs for all measured goods and services rose 0.4% in August, putting the annual inflation rate at 3.4%. Excluding food and energy prices, core inflation is expected to come in at 0.2% for the month and 2.4% annually.
Combined with Thursday's producer price index data, which measures wholesale inflation, the CPI report will help indicate what the Fed's primary inflation gauge, the personal consumption expenditures price index, will show when it is released at the end of September. The CPI data is also expected to weigh heavily on the Federal Open Market Committee's rate decision next Wednesday, with officials noting that a shift of even a percentage point could determine whether the Fed holds or hikes rates.
"The September FOMC decision ultimately hinges on the CPI data ... since a majority of PCE components are derived from CPI," Nomura economists said in a note. "Currently, we maintain our Fed call of no rate hike at the September FOMC meeting. However, if August CPI data, especially PCE-relevant components, surprises to the upside, that would significantly increase the likelihood of policy firming next week."
