New Inflation Report Is an Unhappy Surprise

Investors were fully expecting good news from the new monthly inflation report out Tuesday. But instead of declining, prices actually rose in August. Which means the Federal Reserve is all but certain to forge ahead with an aggressive rate hike at its Sept. 20-21 meeting. Details:

• Monthly rise: Prices rose 0.1% in August from July, according to the Consumer Price Index, reports CNBC. Most analysts had forecast a decline of 0.1%. Investors were hoping for a sign that inflation had peaked.
• Yearly increase: Compared to a year earlier, prices in August were up 8.3%, which is extremely high by historical standards, though below the annual figures of 8.5% in July and 9.1% in June, per the Wall Street Journal.
• Market flips: Dow futures were up about 200 points before the report came out, with investors hoping an inflation cool-down would convince the Fed to temper its interest-rate hikes. But as soon as the report came out, Dow futures were down by 300 points, per CNBC.

• The Fed: The new report is all but certain to keep the Fed "firmly in inflation-fighting mode," per the New York Times. Most observers expect another hike of three-quarters of a percentage point. “Inflation is far too high, and it is too soon to say whether inflation is moving meaningfully and persistently downward,” Christopher Waller, one of the Fed's governors, said last week. “This is a fight we cannot, and will not, walk away from.”

(More inflation stories.)