MNI BRIEF: US Aug Core CPI Surprises Higher On Housing

MNI (WASHINGTON) - U.S. core CPI surprised higher in August on a housing inflation rebound, rising 0.281% last month against expectations for a 0.2% increase. Headline CPI added 0.187%, in line with expectations, the Bureau of Labor Statistics said Wednesday. That brings the 12-month rate for headline and core CPI inflation to 2.5% and 3.2%, respectively. 

Owners' equivalent rent rose 0.50% last month, its strongest increase since January. Rent inflation slowed a tad to 0.37% from 0.49% the previous month. Core services prices excluding housing costs, or supercore CPI, accelerated to a 0.328% increase over the month from 0.207% in July. (See: MNI INTERVIEW: US Inflation Resurgence Still Possible- Koenig )

The Federal Reserve is set to begin lowering interest rates next week after inflation eased in recent months. Wednesday's CPI report was the last major data point ahead of its decision and will likely weaken market pricing for a 50-basis-point cut. After the report, futures traders were pricing in an 85% chance of a smaller quarter point cut. (See: MNI POLICY: Fed Prefers Gradual Rates Easing If Jobs Allow)