US inflation data will be under intense scrutiny next week as investors assess whether the Federal Reserve is preparing to raise interest rates at its September meeting.
The Bureau of Labor Statistics is due to publish the August consumer price index on Friday, September 11, two days before the Federal Open Market Committee begins its policy meeting. The figures are expected to provide the clearest indication yet of whether price pressures are cooling sufficiently for the Fed to leave borrowing costs unchanged. ([bls.gov](https://www.bls.gov/schedule/news_release/cpi.htm?mod=article_inline&utm_source=openai))
Markets will receive an earlier indication from the producer price index, which is scheduled for Thursday. Economists polled by Reuters expect headline consumer prices to have risen by 0.4 per cent over the month, with the core measure, which excludes food and energy, forecast to increase by 0.2 per cent.
The figures have taken on added importance after the latest employment report showed US payrolls rose by 162,000 in August, while the unemployment rate remained at 4.1 per cent. The increase was stronger than expected and followed upward revisions to employment figures for June and July. ([bls.gov](https://www.bls.gov/news.release/archives/empsit_09042026.htm?utm_source=openai))
Investors have been divided over the Fed’s next move. Expectations of a rate increase strengthened after remarks from Fed chairman Kevin Warsh suggested policymakers might need to act if inflation remained elevated, but they eased after Governor Christopher Waller said he would favour holding rates if incoming data confirmed that price pressures were moderating.
Fed funds futures were indicating a 57 per cent probability of a quarter-point increase at the September 15-16 meeting late on Friday, according to the Reuters report. That leaves the inflation figures with the potential to shift market expectations sharply in either direction.
“CPI will certainly move the needle one way or the other … so there is a lot riding on this report,” said Sid Vaidya, chief investment strategist at TD Wealth.
Inflation data to shape rate trajectory
Investors are also watching the bond market, where the yield on the benchmark 10-year US Treasury note rose to 4.78 per cent on Friday. Higher yields can increase borrowing costs for companies and households, while making bonds more attractive relative to equities.
The S&P 500 ended the week with a small gain but remained about 1 per cent below its record high in August. A further rise in interest-rate expectations could put pressure on share valuations, particularly if Treasury yields move towards the 5 per cent level that some investors regard as a threat to the stock market rally.
The US Treasury is also due to begin larger buyback operations for longer-dated debt from September 9. The department said the maximum size of each operation would rise from $2 billion to at least $4 billion as it sought to provide greater liquidity in longer-term Treasury markets. ([home.treasury.gov](https://home.treasury.gov/news/press-releases/sb0607?utm_source=openai))
Alongside the inflation releases, investors will be watching results from Oracle on Thursday for clues about the strength of spending on artificial-intelligence infrastructure. The company is among the major technology groups investing heavily in data centres, making its results a potential test of the market’s wider AI investment story.
