US CPI rose less than expected in August, as the headline index slipped 0.1 percent and weighed the annualized reading down to 5.4 percent from 5.6 percent. Meanwhile, the core reading of CPI - which excludes volatile food and energy prices - edged 0.2 percent higher, but the index failed to accelerate faster from a year earlier, and unexpectedly held at 2.5 percent. However, it is clear that the plunge in crude oil played a huge role in this move, and food prices actually remain elevated which could leave the Federal Reserve somewhat concerned. Overall, though, the numbers should be encouraging for the central bank as they meet today, especially since they have been so focused on upside inflation risks during the past few months. As we discussed in our outlook for today's FOMC meeting, we anticipate that the Committee will leave rates at 2.00 percent and may signal a more neutral stance going forward, which could weigh heavily on the US dollar.
Fed Fund Futures Probabilities
Source: Bloomberg
