US supercore inflation rose 0.5% in a month and 3% over the past year
US consumer prices rose a seasonally adjusted 0.4 percent in August 2026, holding the annual rate at 3.4 percent for a second consecutive month.
The Bureau of Labor Statistics published the monthly consumer price index release last Friday, the last major inflation reading before the Federal Open Market Committee meets in Washington on September 15 and 16.
Core CPI, which strips out food and energy, rose 0.3 percent on the month and 2.4 percent from a year earlier, easing from 2.5 percent in July 2026.
Economists polled by Reuters had looked for a 0.2 percent monthly core print.
The Fed's preferred gauge, the personal consumption expenditures price index, sat at 3.7 percent in July 2026 and has run above the 2 percent target for more than five years, the Financial Times reported.
Odds of a quarter-point increase to the federal funds target range, held at 3.50 to 3.75 percent all year, climbed to roughly 85 percent from about 70 percent before the release, according to CME Group's FedWatch tool cited by Reuters.
"There's no guarantee that the Fed will hike next week, but it's hard to see how the central bank can justify leaving rates on hold," Chris Zaccarelli, chief investment officer at Northlight Asset Management, told CNBC.
Gasoline prices jumped 3.9 percent on the month, accounting for more than a third of the headline gain, while the broader energy index rose 2.1 percent and stood 16.3 percent higher than a year earlier, CNBC reported from the BLS data.
Brent crude settled down 2.81 percent at US$104.61 a barrel on Friday after gaining roughly 8 percent for the week, Reuters reported, following the seizure of Yemen's port city of Mocha by Iran-aligned Houthi forces.
Services pressure was the more troubling detail for policymakers.
Supercore inflation, services excluding energy and housing, rose 0.5 percent on the month and 3 percent year over year, the New York Times reported.
Shelter costs climbed 0.3 percent after moderating over the prior two months.
A September increase would push the Fed's target range to 3.75 to 4.00 percent against a Bank of Canada overnight rate of 2.25 percent, a Canadian rate now held for six consecutive meetings.
Money markets have priced a 25-basis-point Canadian increase before year-end, though more than 80 percent of the 34 economists polled by Reuters expect a hold through 2026, as set out in earlier reporting on how economists read the Bank of Canada's balancing act.
Wealth Professional has also covered the widening gap between Fed and Bank of Canada policy, which affects currency hedging costs, fixed income positioning, and the relative pull of Canadian versus US assets.
The publication examined where the latest hold leaves fixed income allocations in a separate report.
August US goods prices were recorded before President Donald Trump's latest round of tariffs on Canadian imports took effect, the New York Times reported, meaning the pass-through has yet to appear in the data.
Oxford Economics analysts estimate August core PCE likely rose a "benign" 0.2 percent, which would allow the Fed to skip an increase, though they described the decision as being on a "knife's edge," Reuters reported.
Atsi Sheth, chief credit officer at Moody's Ratings, told the Financial Times that some in the market expected a lower CPI reading to keep the Fed on pause and have "now shifted their expectations toward a hike."
Inflation came in largely as expected rather than accelerating, she said, so "the possibility of a continued pause remains on the table."
The University of Michigan consumer sentiment survey fell to 47.8 in early September 2026 from 51.7 in August, against a Reuters poll forecast of 51.0. Year-ahead inflation expectations jumped to 4.6 percent from 4.0 percent.
Average hourly earnings rose 3.1 percent in August 2026, below the 3.4 percent rise in consumer prices, the fifth consecutive month of falling real hourly pay, the New York Times reported.
