Forecasts for August CPI Report Show Inflation Easing Further as Investors Eye September Rate Cut

Markets anticipate the U.S. August unadjusted CPI to drop to 2.6% year-over-year, inching closer to the Fed's mid-term target, largely due to plummeting gasoline prices amid recession fears and demand concerns. Food prices remain stable, and housing rent growth slows. However, the focus may turn to core CPI, expected to remain at 3.2% year-over-year but rise slightly to 0.2% month-over-month.

This inflation data is crucial ahead of the Fed's rate decision next week, with a 70% probability of a 25 basis point cut. Yet, an unexpected dip in CPI could boost expectations for a 50 basis point reduction.