August CPI Report Holds Steady at 3.4% as Federal Reserve Rate Hike Probability Soars

Key Takeaways

• Stock index futures advanced Friday following August inflation figures that registered 3.4% annually, consistent with the previous month
• Month-to-month price growth accelerated to 0.4% from July’s 0.1%, maintaining Federal Reserve concerns
• Market expectations for a Federal Reserve interest rate increase next week surged to 72% from an even split seven days earlier
• Brent crude oil briefly exceeded $108 per barrel while diesel prices reached an unprecedented $6 per gallon
• Oracle (ORCL) stock surged more than 5% before the opening bell following impressive cloud services expansion

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US stock futures advanced Friday morning as market participants analyzed newly released inflation figures indicating consumer prices continue hovering above the Federal Reserve’s inflation objective with the central bank’s policy decision approaching next week.

Dow Jones Industrial Average futures increased 0.5%. Futures tied to the S&P 500 similarly advanced 0.5%, while Nasdaq-100 contracts pushed higher by 0.6%.

The morning gains followed four consecutive sessions of losses across all three benchmark indexes, which remained poised for negative weekly performance.

Breaking Down the Inflation Numbers

The Bureau of Labor Statistics published its August Consumer Price Index data at 8:30 a.m. Eastern.

Annual price increases held at 3.4%, unchanged from the prior month’s reading. On a monthly basis, consumer prices climbed 0.4%, marking a sharp acceleration from July’s minimal 0.1% gain.

The core inflation measure, excluding volatile food and energy components, registered 2.4% annually, ticking down modestly from July’s 2.5% figure. Core prices advanced 0.3% monthly, up from the previous 0.2%.

While the figures aligned with Wall Street forecasts, they underscore that inflation continues exceeding the Federal Reserve’s 2% target considerably.

Rate Hike Expectations Surge

Financial markets responded swiftly. Investors boosted the likelihood of a Federal Reserve interest rate increase at the upcoming week’s meeting to 72%, jumping from approximately 50% odds seven days prior.

The central bank has battled elevated inflation for more than twelve months. Although price growth has moderated since spring, the current trajectory continues causing discomfort among monetary policy officials.

Energy market dynamics have intensified these inflation worries. Brent crude oil prices pushed past $108 per barrel before retreating modestly Friday morning. Meanwhile, diesel fuel costs reached an all-time peak of $6 per gallon.

Elevated energy expenses contribute to both overall inflation readings and consumer expenditure patterns, complicating the Federal Reserve’s inflation-fighting efforts.

Meanwhile, climbing Treasury bond yields have intensified financial conditions, elevating borrowing expenses across residential mortgages, consumer credit cards, and business financing.

Oracle (ORCL) Rallies on Cloud Performance

A notable exception to Friday’s mixed market sentiment emerged with Oracle. The technology company’s shares surged over 5% in premarket trading following the release of quarterly earnings that highlighted robust cloud infrastructure expansion.

Oracle’s performance provided a notable contrast against the broader market anxiety stemming from persistent inflation data and mounting interest rate hike expectations.