(Washington)

Everything you think about the direction of rates could be wrong. That is the general fear after this week’s inflation report. US core consumer prices hit a one-year high in August at 2.4% year-on-year growth, ahead of the Fed’s target. Importantly, it was also a bit higher than expectations. The Fed’s new cutting agenda is partly predicated on the fact that inflation has been so subdued, so any change to that assumption could prove disruptive to a cutting cycle.

FINSUM: We don’t think one month’s report will change the Fed’s path, but it is certainly something to keep an eye on. It is going to make September’s inflation report a lot more important.