Prediction markets pushed September rate-hike odds to 63% after PPI showed producer prices accelerated to 5.4% annually, driven by a 4.2% energy surge.
Core CPI at 0.3% or higher Friday could push the Fed to raise rates, while a cooler 0.2% print may reopen the door for stocks.
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The Federal Reserve has a narrow path to walk. Inflation remains above its 2% target, oil prices have climbed amid renewed tensions in the Middle East, and an August jobs report showing 162,000 new positions gave policymakers less reason to worry about a weakening economy. At the same time, inflation has cooled from its 2026 highs, leaving room for the Fed to keep rates unchanged.
That balance has put Friday's consumer price index (CPI) report at the center of the market's attention. Investors are no longer debating whether inflation matters. They're trying to determine whether August's numbers are hot enough to force the Fed's hand at its Sept. 15-16 meeting.