The August CPI report was generally in line with expectations, but the market is responding to an unexpected surge in initial jobless claims last week.
Claims rose 23,000 last week to unexpectedly surged to 263,000, the highest reading since October 2021. August CPI rose 0.4% m/m versus 0.3% expected, and core CPI matched expectations with a 0.3% m/m increase. Year-over-year, both headline and core CPI were in line with expectations at 2.9% and 3.1%, respectively. Unrounded, the core reading was 0.35% m/m, the highest since January, and it included increases in shelter costs and other categories like apparel, used cars, and airfares. The general market perception has been that it would take a notable upside surprise in today’s CPI report to sway the Fed from not cutting the fed funds rate next week, and this report doesn’t fit that category.
The bond market initially reacted to the claims data with a relatively strong rally in Treasuries, but yields are now down a more modest 2-4 basis points as of 9am ET. As always, the weekly claims data be parsed for any special (one-time) events driving the move, and while not an upside surprise, the CPI report still shows ~3% y/y inflation. The latter will likely make Fed hawks more hesitant to go for a 50-basis point cut next week, but there will likely be a healthy debate. However, the bigger deliberation on that front is how far the various FOMC participants feel we are from a “neutral” rate. Is it 50 bps or 150 bps? The June Summary of Economic Projections showed a barbell of participants on each end of that general range. The bond market is currently priced for the bigger gap of 150 bps, getting below a 3% funds rate by the end of 2026.
Jason Haley
Chief Investment Officer
| Date | Event | Survey | Actual | Prior |
| 9/11/2025 | CPI MoM | 0.30% | 0.40% | 0.20% |
| 9/11/2025 | CPI Ex Food and Energy MoM | 0.30% | 0.30% | 0.30% |
| 9/11/2025 | CPI YoY | 2.90% | 2.90% | 2.70% |
| 9/11/2025 | CPI Ex Food and Energy YoY | 3.10% | 3.10% | 3.10% |
| 9/11/2025 | CPI Index NSA | 323.942 | 323.976 | 323.048 |
| 9/11/2025 | CPI Core Index SA | 329.62 | 329.793 | 328.656 |
| 9/11/2025 | Real Avg Hourly Earning YoY | — | 0.70% | 1.20% |
| 9/11/2025 | Real Avg Weekly Earnings YoY | — | 0.40% | 1.40% |
| 9/11/2025 | Initial Jobless Claims | 235k | 263k | 237k |
| 9/11/2025 | Initial Claims 4-Wk Moving Avg | — | 240.50k | 231.00k |
| 9/11/2025 | Continuing Claims | 1950k | 1939k | 1940k |
| 9/11/2025 | Household Change in Net Worth | — | — | -$1595b |
| 9/11/2025 | Federal Budget Balance | -$340.0b | — | -$380.1b |
| 9/12/2025 | U. of Mich. Sentiment | 58 | — | 58.2 |
| 9/12/2025 | U. of Mich. Current Conditions | 62 | — | 61.7 |
| 9/12/2025 | U. of Mich. Expectations | 56 | — | 55.9 |
| 9/12/2025 | U. of Mich. 1 Yr Inflation | 4.70% | — | 4.80% |
| 9/12/2025 | U. of Mich. 5-10 Yr Inflation | 3.40% | — | 3.50% |
| 9/15/2025 | Empire Manufacturing | 4.9 | — | 11.9 |
| 9/16/2025 | Retail Sales Advance MoM | 0.30% | — | 0.50% |
| 9/16/2025 | Retail Sales Ex Auto MoM | 0.40% | — | 0.30% |
| 9/16/2025 | Retail Sales Ex Auto and Gas | 0.50% | — | 0.20% |
| 9/16/2025 | Retail Sales Control Group | 0.30% | — | 0.50% |
| 9/16/2025 | New York Fed Services Business Activity | — | — | -11.7 |
| 9/16/2025 | Import Price Index MoM | — | — | 0.40% |
| 9/16/2025 | Import Price Index ex Petroleum MoM | — | — | 0.30% |
| 9/16/2025 | Import Price Index YoY | — | — | -0.20% |
| 9/16/2025 | Export Price Index MoM | — | — | 0.10% |
| 9/16/2025 | Export Price Index YoY | — | — | 2.20% |
| 9/16/2025 | Industrial Production MoM | 0.00% | — | -0.10% |
| 9/16/2025 | Manufacturing (SIC) Production | — | — | 0.00% |
| 9/16/2025 | Capacity Utilization | 77.40% | — | 77.50% |
| 9/16/2025 | Business Inventories | 0.20% | — | 0.20% |
| 9/16/2025 | NAHB Housing Market Index | — | — | 32 |
| 9/17/2025 | MBA Mortgage Applications | — | — | 9.20% |
| 9/17/2025 | Housing Starts | 1375k | — | 1428k |
| 9/17/2025 | Building Permits | 1370k | — | 1362k |
| 9/17/2025 | Housing Starts MoM | -3.70% | — | 5.20% |
| 9/17/2025 | Building Permits MoM | 0.60% | — | -2.20% |
| 9/17/2025 | FOMC Rate Decision (Upper Bound) | 4.25% | — | 4.50% |
| 9/17/2025 | FOMC Rate Decision (Lower Bound) | 4.00% | — | 4.25% |
| 9/17/2025 | Fed Interest on Reserve Balances Rate | — | — | 4.40% |
| 9/17/2025 | Fed Reverse Repo Rate | — | — | 4.25% |
| 9/17/2025 | FOMC Median Rate Forecast: Current Yr | — | — | 3.88% |
| 9/17/2025 | FOMC Median Rate Forecast: Next Yr | — | — | 3.63% |
| 9/17/2025 | FOMC Median Rate Forecast: +2 Yrs | — | — | 3.38% |
| 9/17/2025 | FOMC Median Rate Forecast: +3 Yrs | — | — | 3.13% |
| 9/17/2025 | FOMC Median Rate Forecast: Long-Run | — | — | 3.00% |
| 9/18/2025 | Initial Jobless Claims | — | — | 263k |
| 9/18/2025 | Initial Claims 4-Wk Moving Avg | — | — | 240.50k |
| 9/18/2025 | Continuing Claims | — | — | 1939k |
| 9/18/2025 | Philadelphia Fed Business Outlook | 3 | — | -0.3 |
| 9/18/2025 | Leading Index | -0.10% | — | -0.10% |
| 9/18/2025 | Net Long-term TIC Flows | — | — | $150.8b |
| 9/18/2025 | Total Net TIC Flows | — | — | $77.8b |
