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before the opening of the u.s. stock market on wednesday (september 11), the u.s. department of labor announced that the core month-on-month inflation rate in august rebounded more than expected, which dampened market expectations for the extent of the federal reserve's interest rate cut. u.s. stock futures fell and u.s. treasury yields rose.

specific data showed that in august this year, the us consumer price index (cpi) rose by 0.2% month-on-month, in line with expectations; the year-on-year growth rate slowed from 2.9% in the previous month to 2.5%, the lowest level since march 2021, and fell for the fifth consecutive month. the market originally believed that it would only slow down to 2.6%.

_{overall cpi year-on-year change}

among the sub-items, food prices rose by 0.1% month-on-month and 2.1% year-on-year; energy prices fell by 0.8% month-on-month and 4.0% year-on-year. among them, gasoline prices fell by 0.6% month-on-month and 10.3% year-on-year; fuel oil fell by 1.9% and 12.1% year-on-year.

excluding the more volatile food and energy prices,the core cpi rose 0.3% month-on-month in august, while the market had expected it to remain at 0.2%.; the year-on-year growth rate continued to remain unchanged at 3.2%, in line with market expectations.

_{core cpi month-on-month change}

among them, housing prices rose by 0.5% month-on-month and 5.2% year-on-year, indicating that housing-related costs are still a problem; transportation service prices rose by 0.9% month-on-month and 7.9% year-on-year. both are the main reasons for the high core inflation rate.

after the data was released, the market reduced its expectations for the fed to cut interest rates next week. cme's "fed watch" tool showed thatthe probability of a 25 basis point rate cut next week rose to 85% from 71%, while the probability of a 50 basis point cut fell to 15% from 29%.

neil birrell, chief investment officer at premier miton investors, said that inflation data was mostly in line with expectations, but core inflation was higher than expected, mainly driven by housing costs. the possibility of a 50 basis point rate cut by the federal reserve next week was hit hard by this data, but it was not enough to stop the fed from cutting interest rates.

just 10 minutes after opening, the dow jones industrial average fell more than 1%, the s&p 500 fell about 0.4%, and the nasdaq rose slightly by more than 0.1% due to the influence of technology stocks such as nvidia. the 2-year treasury yield, which is most closely related to the fed's interest rate expectations, rose nearly 4 basis points to 3.639% during the day.

chris larkin, head of trading and investment products at e*trade, said the market generally expects the federal reserve to cut interest rates by 25 basis points next week, and the cpi data released today has largely affected expectations of a rate cut, which may disappoint investors who hope for a larger rate cut.

seema shah, senior global investment strategist at principal asset management, commented that the fed's path to a 50 basis point rate cut has become more complicated due to higher-than-expected core inflation.

shah said hawks on the fomc are likely to seize on today’s cpi report as evidence to highlight the importance of tackling the “last mile” of inflation — which would be a strong reason to cut rates by 25 basis points.