Investors Eye CPI Release Amid Tariff-Driven Price Pressures

U.S. markets rallied Wednesday as investors prepared for Thursday’s Consumer Price Index report, expecting headline inflation of 2.9% year-on-year and a 0.3% rise month-on-month for August, with core CPI also projected at 3.1% annually.

The eagerly awaited CPI reading will gauge the extent to which recent tariffs have pushed up consumer prices and influence Federal Reserve rate-cut bets.

Tariff Pass-Through Keeps Inflation Elevated

Economists forecast that August’s headline CPI will climb 2.9% from a year earlier, up from 2.7% in July, driven largely by imported goods affected by higher import duties. Core CPI, excluding volatile food and energy, is expected to match July’s 3.1% annual gain, underscoring sticky services inflation and shelter costs.

Markets Move on Producer Prices Ahead of CPI

Wednesday’s Producer Price Index showed a 0.1% decline in final demand prices for August, contrasting with a 0.7% rise in July. Excluding food, energy and trade services, producer prices still rose 0.3%, the fourth consecutive monthly increase, signaling ongoing upstream cost pressures.

• Producer prices for goods edged up 0.1%, while services prices fell 0.2%.
• Final demand less foods, energy and trade services advanced 0.3%, marking the largest annual gain since March 2025.

Fed Watching Inflation Data for Rate-Cut Timing

Fed officials remain data-dependent, acknowledging that elevated tariffs may be transitory yet wary that persistent core inflation could delay rate cuts. Markets still price in a September rate reduction, but a CPI surprise above forecasts could push expectations into next quarter.

As investors parse PPI trends and seek confirmation from tomorrow’s CPI figures, attention will focus on whether tariff-induced price spikes subside or extend inflation’s recent plateau.