Sticky inflation report unlikely to keep Fed off course for rate cut next week

Inflation Data and Federal Reserve Response - The Consumer Price Index (CPI) showed core prices rose by 3.1% in August, consistent with July's level, while month-over-month growth was slightly higher than expected at 0.4% compared to the anticipated 0.3% [1][2] - Headline inflation increased by 2.9% in August, up from 2.7% in July, indicating broad increases in goods, services, and shelter prices [2] - The inflation data suggests a 25-basis point rate cut is likely, but does not support a larger 50-basis point cut [3][6] Job Market Trends - Initial jobless claims rose to 263,000, the highest level in four years, indicating softening in the job market [4] - The economy added only 22,000 jobs in August, significantly below the expected 75,000, with the unemployment rate increasing to 4.3% from 4.2% [4][5] - Job growth for June was revised to a loss of 13,000 jobs, and July's growth was below trend, marking three consecutive months of slowing job growth [5][6] Market Expectations - Markets are pricing in a near certainty for a 25-basis point rate cut at the upcoming Federal Reserve meeting [6] - Fed Chair Jerome Powell indicated a potential shift in policy stance due to changing risk balances, suggesting a readiness to lower rates [6] - Former Kansas City Fed president Esther George noted that recent job market data supports the expectation of a 25-basis point cut [6]