Fed rate-hike pricing jumps to 90% after US core CPI exceeds forecast

  • Interest-rate swaps raised pricing for a Federal Reserve hike next week.
  • 90% was the post-data probability, up from 69% beforehand.
  • US stock indexes all retreated from their weekly highs.

Markets sharply increased expectations for a Federal Reserve rate hike next week after US inflation data showed stronger-than-expected underlying price pressures. August PPI rose 5.4% year over year, above the 5.3% forecast, while headline CPI increased 3.4% year over year, matching July and expectations. Core CPI, which excludes food and energy, rose 0.3% month over month against a 0.2% forecast. Interest-rate swaps subsequently priced roughly a 90% chance of a hike, up from 69% before the data, while two rate increases for the year were fully priced in. The week’s market focus also included oil returning to $100, renewed inflation expectations, Middle East supply risks and long-term borrowing costs. All three major US stock indexes retreated from their highs over the week, PANews reported on Sept. 13, citing Jin10.

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