Investors and economists are closely monitoring the release of August’s Consumer Price Index (CPI) on Wednesday, September 13th, a pivotal data point that will factor into the Federal Reserve’s impending interest rate deliberations. Estimates from Bloomberg anticipate a noteworthy acceleration in headline inflation, with August likely to record a 3.6% increase, surpassing July’s 3.2% annual price growth. In terms of monthly changes, consumer prices are projected to have surged by 0.6% in August, marking a swifter pace compared to the 0.2% rise in July.

The driving force behind these inflationary pressures is the significant upswing in energy prices. Oil prices surged to year-to-date highs, with West Texas Intermediate (WTI) closing just shy of $89 per barrel, while Brent crude futures surpassed $92 per barrel, reaching levels not seen since November 2022. Stripping out the more volatile components of food and gas, the core inflation rate is anticipated to have risen by 4.3% over the past year, albeit at a slower pace than the 4.7% annual increase registered in July. Furthermore, monthly core prices are predicted to have climbed by 0.2%, aligning with July’s monthly uptick.

Within the core category, used car prices are expected to have continued their decline, following a 1.3% drop in July and a 0.5% decrease in June. Bank of America anticipates further declines in other core goods categories, such as household furnishings, recreation commodities, education, and communication commodities, as supply chains continue to improve. However, the bank foresees an upward trajectory in food prices for a second consecutive month, while shelter inflation is also expected to remain elevated. Bank of America economist Michael Gapen noted the potential for shelter inflation to moderate over time, citing soft rent increases in rent inflation measures. This moderation is anticipated to contribute to controlling inflation in the months ahead.