Core inflation in the US unexpectedly picked up in August, thanks to rising housing and travel costs. This dampened hopes for a significant rate cut from the Federal Reserve next week.

The core Consumer Price Index (CPI), which excludes volatile food and energy prices, rose 0.3% from July—the highest increase in four months—and 3.2% from a year ago. The three-month annualised rate jumped to 2.1%, up from 1.6% in July.

While this increase won’t stop the Fed from trimming interest rates, it does take the wind out of the sails of those dreaming of a hefty rate cut. Housing, ever the reliable culprit, was labelled the “main factor” behind the overall rise.

Wednesday’s data won’t block a modest rate cut, but it certainly leaves little room for the “lash-and-burn” approach some were hoping for. Traders have now dialled back the chance of a half-point cut to near zero, with Treasury yields rising and the S&P 500 taking a nosedive.
Oh, and just for the record, the core CPI actually rose by 0.28%—you know, in case you fancy looking at things to two decimal places like the Fed does.

Rising rents, airline fares, clothing, and childcare—the usual suspects —fuelled to the inflation fire. Even auto insurance and hotel prices joined the fun. Housing costs, the biggest slice of services, jumped by 0.5%—the most significant increase since the start of the year, defying those who had optimistically predicted a slowdown.

With all this, the Fed’s next move seems to be less about slashing rates and more about holding their nerve. As one economist noted, the game isn’t about cutting rates next week—it’s about seeing whether wage growth and inflation spiral out of control in the coming months.
So, while some dream of quick fixes and aggressive cuts, the numbers aren’t adding up. Better luck next time, rate-cut hopefuls.