• The US Consumer Price Index is forecast to rise 2.6% YoY in August, at a softer pace than July’s 2.9% increase.
• Annual core CPI inflation is expected to hold steady at 3.2%.
• The inflation data could alter the odds of a 50 bps Fed rate cut in September and rock the US Dollar.

The Bureau of Labor Statistics (BLS) will publish the highly anticipated Consumer Price Index (CPI) inflation data from the United States (US) for August on Wednesday at 12:30 GMT.

The US Dollar (USD) braces for intense volatility, as any surprises from the US inflation report could significantly impact the market’s pricing of the Federal Reserve (Fed) interest rate cut expectations in September.

What to expect in the next CPI data report?

Inflation in the US, as measured by the CPI, is expected to increase at an annual rate of 2.6% in August, down from the 2.9% rise reported in July. The core CPI inflation, which excludes volatile food and energy prices, is seen to stay unchanged at 3.2% in the same period.

Meanwhile, the CPI and the core CPI are both forecast to rise 0.2% on a monthly basis, matching July’s increase.

Previewing the August inflation report, “we expect core CPI prices to remain largely under control in August, printing a fourth consecutive gain under 0.2% m/m. Services inflation will play a key role owing to cooling shelter prices,” said TD Securities analysts in a weekly report. “Headline inflation likely also stayed subdued with energy prices returning to deflation. Our unrounded core CPI forecast at 0.14% m/m suggests larger risks toward a rounded 0.2% increase.”