August inflation report could set the course for interest rates, affordability crisis

Friday’s inflation report could mark a pivotal moment in the U.S. affordability crisis and the tenure of President Donald Trump’s newly-installed Federal Reserve chairman.

The Consumer Price Index is expected to show that inflation rose 0.4% in August from July, and remained flat at 3.4% from a year ago. Core inflation, which strips out food and energy costs is expected to rise just 0.2% month-over-month.

The data may already be stale, however. On Thursday, U.S. crude oil rose above $100 per barrel for the first time since May, and international Brent crude oil surged past $107.

Nonetheless, investors believe that the Fed’s decision next week on whether or not to raise interest rates could hang on Friday’s report. The Fed has not raised or lowered rates at all this year.

“if inflation comes in hot, I would consider a rate hike,” said Federal Reserve governor Christopher Waller in a speech earlier this month.

Yet Waller also noted that “recent data suggest we are finally seeing some signs of disinflation.”

If those disinflationary signals were to continue “over the next two weeks” — a not-so-subtle reference to Friday’s Consumer Price Index reading — Waller would be inclined to keep rates unchanged.

Original source: https://www.nbcnews.com/business