Fed Set to Hit Pause in September as Inflation Finally Starts to Cool

TLDR

• Recent inflation data shows consumer and producer prices barely rose in July, reducing pressure on the Fed to hike rates
• Traders now price a 71% chance the Fed holds rates steady at its September meeting
• Core CPI rose just 0.2% monthly and 2.5% annually in July, meeting expectations
• Fed is divided, with some members pushing for rate hikes to get inflation back to 2% faster
• Energy prices fell 1.5% monthly in July, helped by easing oil prices despite ongoing Middle East tensions

Fresh inflation data released this week has shifted expectations toward the Federal Reserve holding interest rates steady at its September meeting.

🇺🇸 TRADERS NO LONGER FULLY PRICE IN A FED RATE HIKE THIS YEAR

Prediction markets now see a 70% chance the Fed holds rates steady in September, versus 29% odds of a 25bp hike.

A 25bp cut is priced at just 2%.

Markets are increasingly betting the Fed can remain on hold as… pic.twitter.com/UyVoLzGrso

- *Walter Bloomberg (@DeItaone) August 13, 2026

The Labor Department reported on Thursday that producer prices were unchanged month-over-month in July. A day earlier, it reported consumer prices barely rose in July, after falling in June.

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