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Traders pushed chances for a rate increase to 70% in morning action, following a report showing increasing wholesale prices in August and a coincidental jump in U.S. crude oil prices past $100 a barrel, according to the CME Group's
The The Dow Jones consensus is for a headline annual reading of 3.4%, though the core excluding food and energy is forecast at 2.4%. The Fed, though, focuses on the Commerce Department's personal consumption expenditures price index, which showed core at 3.3% in July and headline at 3.7%. Fed Chairman reemphasized recently that the PCE price index is the Fed's official yardstick for inflation. Bank of America senior U.S. economist Stephen Juneau estimated that, accounting for the August PPI reading, core PCE is tracking at a 0.26% monthly rate, which would get rounded up to 0.3%. "This could move significantly tomorrow after CPI, but if we are correct, it should greenlight a hike at next week's Fed meeting," Juneau said in a note. BofA has one of the most hawkish Fed forecasts on Wall Street, expecting three hikes at upcoming meetings. While that's out of consensus with current futures pricing, recent developments point to a more aggressive Fed when it comes to inflation fighting. Peter Boockvar, chief investment officer at One Point BFG Wealth Partners, said that even a soft CPI reading might just indicate that companies are having a harder time passing through higher prices to consumers. "Those who just look at consumer prices for their inflation information and interest rate predictions are not looking at the complete picture, and today's PPI is evidence still of an inflation problem throughout the supply chain," Boockvar said.One more report
