US August CPI: Slight Positive Surprise with Mixed Market Reactions

The Consumer Price Index (CPI) for the United States in August recorded a reading of 3.4%, matching both expectations and the previous month's figure. While there was an initial positive reaction to the data, particularly regarding core monthly changes, the market's subsequent response proved mixed. The probability of a rate hike by the Federal Reserve (Fed) in September increased to 82%, signaling a more hawkish stance than previously anticipated with around a 43.7 bps increase this year. Notably, sub-index components showed varied trends, including increases in rental prices and accommodation costs outside the home. However, new vehicle insurance expenses saw significant decreases. The US dollar initially appreciated but later reversed course as risk assets gained ground, an unexpected move given the hawkish market outlook for the Fed.