MACRO: No Fed pivot in sight

• Headline inflation eases less than expected
• Core inflation above expectations
• Market expect more hawkish approach from the FED 

The annual inflation rate in the US eased for a second straight month to 8.3% in August, the lowest in 4 months, from 8.5% in July but above market projections of 8.1%. On the monthly basis, headline CPI came hotter than expected, rising 0.1% MoM vs expectations of -0.1% MoM, which is the 27th straight month of rising inflation. The annual core inflation rate also accelerated to 6.3% in August, the highest since March, from 5.9% in the previous month and above analysts’ estimates of 6.1%, lifted by housing, medical costs and vehicle prices.

US inflation remains elevated, especially that rental components increased 0.7%, utility payments rose by 1.5% while new car prices jumped 0.8% and used car prices fell “only” 0.1%, which was offset by a 10.6% decline in gasoline cost. Meanwhile the food index surged 11.4% over the last year, the largest 12-month increase since May 1979. Source: Bloomberg via ZeroHedge

The energy index increased 23.8%, below 32.9% in July. Smaller increases were reported for gasoline costs (25.6% vs 44%) and fuel oil (68.8% vs 75.6%) while inflation sped up for natural gas (33% vs 30.5%) and electricity (15.8%, the most since August 1981). Meanwhile, inflation rose for food (11.4%, the most since May of 1979), shelter, which is the single biggest component as it accounts for 33.0% of the index (6.2% vs 5.7%), used cars and trucks (7.8% vs 6.6%). Even without transport and car prices US inflation would exceed 5% and - more importantly - is on the consistent rise. Source: XTB, Macrobond

Today's hotter-than-expected US inflation reading increased expectations that the Fed will have to move even more aggressively to tame price growth. Money markets have priced in a 75 bps hike next week and placed almost 25% odds on 100 basis points, therefore any dovish-pivot is as good as dead at least for now.