Market Braces for Inflation Data, Investors Remain Cautious

Analysts predict that the August Consumer Price Index (CPI) report will show a rise in headline CPI to 3.6%, driven by increased oil and gasoline prices. The bond market expects inflation to persist, leading to higher rates and a stronger dollar, while the equity market hopes for rate cuts. The rise in oil and gasoline prices is expected to worsen the inflation outlook, and there are concerns about a turn in the used auto market and rising home and rental prices. The bond market's breakeven inflation expectations have risen, indicating that inflation is likely to continue to be a problem. The Federal Reserve may need to raise rates further unless the data changes significantly.