Breaking News: US core inflation rate at 3.1% Y/Y in August vs 3.1% expected

• US core inflation rate August (YoY): +3.1% vs +3.1% expected, meets consensus
• US core inflation rate August (MoM): +0.3% vs +0.3% expected, meets consensus
• US non-core inflation rate August (YoY): +2.9% vs +2.9% expected, meets consensus
• US non-core inflation rate August (MoM): +0.4% vs +0.3% expected, above consensus by +0.1%

Breaking: The US core inflation rate came in at 3.1% YoY in August, meeting consensus and remaining unchanged month over month. Otherwise, non-core headline inflation figures met predictions YoY, at 2.9%, but rose faster than expectations MoM by +0.1%, coming in at 0.4%.

Released at the same time, weekly initial jobless claims rose above expectations by 28,000, to 263,000. Stealing the limelight somewhat from inflation data, the report represents the highest level of unemployment claims made since late 2021.

Key takeaway: Although not rising, core inflation is proving somewhat sticky and remains decisively above the Fed target of 2%. Since last month, yearly core inflation is at its highest level since March, but this will pose little obstacle to a decision to cut rates next week, courtesy of recent labour data.

"The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.4 percent on a seasonally adjusted basis in August, after rising 0.2 percent in July, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 2.9 percent before seasonal adjustment."

Consumer Price Index (PPI) August, U.S. Bureau of Labor Statistics

Put simply, current inflation levels are too high compared to the Fed's target of 2%. Although not increasing by most yardsticks bar monthly non-core, inflation is proving somewhat sticky, which puts the Fed in an awkward position.

While the textbook response to too-high inflation is to raise rates, soft labour data, including today's jobless claims, support the notion of cutting rates, putting the Federal Reserve in a catch-22.

Upcoming data points, especially regarding how the US labour market responds to impending interest rate cuts, remain as crucial as ever.

On the inflation front, and as per yesterday's report, the Federal Reserve can take some comfort in lower-than-expected PPI data.

Read more MarketPulse coverage on today's CPI report: A hesistant FX Market after the as-expected September CPI release – Technical levels