Two numbers are about to do a lot of heavy lifting. The Federal Reserve’s September policy decision is riding on inflation data landing September 10 and 11, just days before officials convene for their FOMC meeting on September 15-16. If those figures come in hot, the central bank may have little political cover to stay on hold.
Fed Governor Christopher Waller has said explicitly that August inflation readings will influence whether the Fed moves on rates.
What the data will show, and why it matters
First up is the producer price index for August, due September 10, with consensus expecting a monthly gain of 0.4%. A day later, the consumer price index arrives, with forecasters projecting the same 0.4% monthly increase and a year-over-year reading of 3.4%.
Think of PPI as a leading indicator: when costs rise at the factory and wholesale level, they tend to filter through to the prices consumers pay weeks later. CPI is the more publicly visible number, but the Fed’s actual preferred gauge is the personal consumption expenditures index, which pulls from both reports.
That PCE figure is the one doing the most damage to the Fed’s credibility right now. Headline PCE came in at 3.7% year-over-year through June, down from 4.1% in May, but still nearly double the Fed’s 2% target. Core PCE, which strips out food and energy, sits at 3.3%.
The current federal funds rate target sits at 3.50%-3.75%, a level the Fed has held since early 2026.
Economists split, but the majority bets on a hold
A Reuters poll of economists conducted September 4-9 found that roughly 70% expect the Fed to leave rates unchanged through the rest of 2026. A notable share of respondents still anticipate at least one additional hike before the year ends.
That split mirrors what emerged from the Fed’s own June projections. At least nine FOMC participants indicated then that they expected at least one more rate increase by year-end.
The employment picture has receded somewhat as the primary focus. After recent jobs data, the attention of traders and analysts has pivoted squarely to price pressures ahead of the FOMC meeting.
What a hot print would actually trigger
Governor Waller’s signal that August inflation data could prompt a quarter-point rate hike places the potential move in specific terms. A 25-basis-point increase from the current range would push the target to 3.75%-4.00%.
The disinflation trend has been real. Moving from 4.1% to 3.7% headline PCE in a single month is not nothing. But two consecutive months of 0.4% monthly gains in both PPI and CPI would complicate that trust considerably.
Inflation still running at 3.7% headline and 3.3% core is a long way from the Fed’s 2% target. A decision to hold rates in the face of persistently elevated readings risks signaling that the target is more of a suggestion than a commitment.