August Inflation on the Rise in the US; Could the FED pause interest rates next week?

The latest US Consumer Price Index (CPI) report for August brought surprises. Core prices saw growth of 0.6% month-on-month, with a year-to-date increase of 3.7%. Much of this growth has a well-known villain: oil.

It is a fact that the job market is showing signs of fatigue, but it still maintains its pulse. And recent energy prices aren’t helping, adding fuel to the inflation fire. The Fed, in its mission to maintain stability, already had a target: 2% inflation. But August laughed and said, “hold my beer.”

Analysts expected some moves from the central bank. But according to CME Group statistics, there is a 95% chance the Fed will keep rates where they are at its next meeting on September 20th. Such a decision would undoubtedly be a refreshing break after the 0.25% increase in July.

Brian Pietrangelo of Key Private Bank echoed the general sentiment: the economy has its pace, but also its moments of hesitation. And the Fed’s decision? Probably a break. But he is not alone in this opinion. Seema Shah of Principal Asset Management believes a rate hike is still possible by the end of the year, but the decision will not be easy.

When looking at the CPI numbers, some economists point to a small relief in seeing the slowdown in shelter prices. However, rising service prices and underlying inflation are raising eyebrows. Eugenio Aleman, an economist, notes that the Fed will probably be “on the defensive”.

Even though the core CPI excluding food and energy has seen an annual decline, the challenge for the FOMC next week will not be trivial. After all, oil showed no signs of fatigue and continued to grow in September.

When is the next Fed meeting? the next meeting in the United States will take place next week, between September 19th and 20th, 2023 (Tuesday and Wednesday).

In the world of cryptocurrencies, many look at these fluctuations with analytical eyes, trying to decipher the next steps. At the time of publication, the price of BTC was quoted at US$26,280.00, up 0.5% in the last 24 hours.

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