With the Federal Reserve's next policy meeting just days away, the upcoming August Consumer Price Index (CPI) report stands as the final major inflation reading before officials convene. Following a much stronger-than-expected jobs report for August that boosted bets on a September rate increase, this week's inflation data carries significant weight for the central bank's impending decision.

According to the latest CME FedWatch tool data, futures traders currently price in a 62% probability of a 25-basis-point rate hike at next week's meeting, up from 44% a month earlier. The July core CPI reading came in better than anticipated, rising 0.2% month-over-month, below the 0.3% market consensus, while the annual core inflation rate of 2.5% matched projections. The U.S. Bureau of Labor Statistics is scheduled to release the August CPI report on Tuesday, September 11 at 8:30 a.m. Eastern Time.

Where market experts stand on the August CPI print

Mark Malek, Chief Information Officer at Siebert Financial, notes that the August CPI data arrives just five days before the Federal Reserve's rate-setting committee convenes under Chairman Kevin Warsh. Warsh made clear in his Jackson Hole symposium remarks last month that he is not yet prepared to declare victory in the inflation fight, and market expectations for a rate move have since swung back and forth. Any single data point this week warrants cautious interpretation. With oil hovering near $100 per barrel and prices rising in the two days leading up to this closely watched release, the path to a decision becomes even more complicated for Warsh.

Lukman Otunuga, Head of Research at FXTM, highlights that Brent crude breaking above $100 per barrel represents a significant psychological threshold for markets, but the greater concern lies in its inflationary impact. A prolonged oil shock could keep upward pressure on prices, complicating policy decisions for central banks already navigating a complex environment. The European Central Bank and U.S. inflation data therefore become especially critical. Markets are currently caught between two opposing forces: rising energy costs strengthen the case for tightening, while softer underlying inflation gives policymakers room to remain cautious. This week's data will help determine which narrative prevails.

BlackRock observes that last week's surprisingly strong jobs report led markets to raise expectations for a Fed rate hike this month, putting U.S. inflation data in the spotlight. However, the firm argues a rate increase is far from a foregone conclusion. This week's CPI will provide another crucial data point; if the numbers come in hot, the balance could tip toward tightening and push global bond yields higher.

Jason Pride, Head of Investment Strategy Research, and Michael Reynolds, Deputy Director of Investment Strategy at Glenmede, emphasize that this week's CPI is the most important indicator before the Fed's September meeting and represents the final inflation reading policymakers will see prior to their rate decision. Headline inflation is expected to ease slightly to 3.3% year-over-year from 3.4%, but core prices are projected to tick up to 0.22% month-over-month from July's 0.20%. With Middle East tensions escalating and energy prices staying elevated, investors will closely monitor whether this pressure filters into core inflation. Governor Waller signaled last week that if inflation data runs hot, the possibility of a rate hike could re-open, providing some basis for markets to seek policy clues from Warsh's remarks. Investors should not assume a rate increase this month is locked in; the argument for tightening remains rooted in energy-driven inflation impulses, and there is currently no strong evidence that price pressures have become broadly entrenched.

Wells Fargo's outlook on August inflation

Wells Fargo anticipates a rebound in headline inflation for August. The bank projects a 0.40% month-over-month increase in CPI, driven by Middle East tensions pushing oil prices higher and gasoline costs rising slightly more than 4%. Grocery prices, which eased modestly in July, are likely to bounce back in August. Excluding food and energy, price pressures are expected to remain largely unchanged, with core CPI projected to rise 0.23% month-over-month, roughly in line with July's level.