Our Take on the August CPI

* August CPI data was in-line to warmer than expected, dashing market hopes for a clear Fed policy picture

* Core CPI rose +4.3% as expected but +0.3% MoM vs. the +0.2% consensus

* Today's data will likely see a more hawkish Fed in tone, but the focus will now be on September and October inflation data

The August Consumer Price Index (CPI) is out and the data for both the headline and core measures were in-line to warmer than expected. Those hoping for a clearer picture for what the Fed may do later this year will be disappointed despite some progress in the core CPI. To be clear, there was no positive surprise in the data, and by that we mean reported figures coming in below consensus expectations.

As expected, headline CPI accelerated further in August due to higher gas prices as well as shelter costs, but the reported figure of +3.7% year over year was warmer than the +3.6% consensus forecast and July's +3.2% reading. On a month over month basis, headline CPI rose +0.6%, in-line with the consensus forecast but this too was up from +0.2% in June and July.

Turning to the core-CPI for August, while it matched the year over year consensus forecast of +4.3%, on a month over month basis, the +0.3% figure was warmer than the expected +0.2% reading. And for added context, the month over month core CPI figures for showed back-to-back increases of +0.2% in June and July.

Coming into the report, the market expectation was the Fed would hold rates steady following next week's policy meeting. We do not see that changing, however, given the re-acceleration in some of the inflation metrics, we suspect the Fed's policy statement and Fed Chair Powell's presser comments will lean more hawkish than not.

We should expect the Fed to reiterate it will remain vigilant and will continue to act as needed to ensure inflation returns to the Fed's target. At a minimum, today's data will support the Fed holding the fed funds rate at current levels for some time.

Given today's data, there is little question in our minds the Fed will reiterate its data dependent stance, and as we discussed in yesterday's Rundown, it means the market will now focus on September and October inflation data. This means tomorrow's August Producer Price Index, which tends to be a leading indicator for CPI, will bear watching.