PPI matched forecasts – CPI will decide the next move

August PPI rose 0.4% month-on-month, right in line with expectations. On the surface, that sounds fairly harmless.

So was it a relief? Not really.

If you look at the fine print, final-demand goods rose 1.1%, energy jumped 4.2%, while transportation and warehousing services rose 2.3%.

These are exactly the kinds of costs that can eventually work their way into consumer prices through fuel, freight and distribution costs.

Markets did not exactly treat PPI as an all-clear either. The S&P 500 fell 0.76%, the Nasdaq 100 fell 1.14%, while the Dow slipped 0.93%.

So what should we expect from CPI?

Energy’s 4.2% jump gives us a reason to lean slightly higher on headline CPI inflation, which is currently expected to come in at 0.4% month-on-month and 3.4% year-on-year.

Core CPI is a little less obvious. Expectations are for 0.2% month-on-month and 2.4% year-on-year.

For now, our base case is still close to that.

Nick Timiraos from The Wall Street Journal points out the median core CPI estimate from various American financial institutions is actually 0.22%.

All 17 forecasts range from 0.16% to 0.24%, yet every one of them still rounds to 0.2%.

So if core CPI lands at 0.2%, it is worth looking one layer deeper. A reading near 0.24% is a different inflation signal from 0.16%, even if both show up as the same number on the calendar.

He also notes that the PPI components feeding into core PCE were firm.

And what is the market already pricing?

Quite a lot. 

For one, the rate hike expectations are coming in at nearly 70% as of September 11th, 2026 – right before the CPI data release.

Similarly, the bond market is also leaning in the same direction. 

The US 10-year yield was already near 4.83% in this snapshot, with the 2-year around 4.43%. If CPI comes in hot, yields have another reason to push higher. If core comes in soft, some of that hike pricing can unwind.

What is the clearest upside risk? Energy.

July energy CPI was already 14.7% higher year-on-year, August gasoline prices were firmer and PPI energy just rose 4.2%.

US diesel futures have surged above roughly $216 per barrel, beyond the 2022 crisis peak. That is more important for what comes next than for August CPI itself. If diesel stays expensive, trucking, agriculture, warehousing and distribution costs have more room to feed into goods, food and services.

So what happens if CPI is hot?

The S&P 500 is already testing the area around 7,600. If CPI pushes yields higher and SPX loses that level, the 50-day EMA band (the green Bollingers Band with 1 standard deviation) around 7,500 becomes the next area to watch.

If buyers reclaim 7,600 quickly, the broader trend is still intact.

The Nasdaq is even more sensitive to rates. It is testing the 28,650–28,850 support area near its 100-day EMA band (0.5 sd).

If core CPI reaches 0.3% or higher, a break there would put roughly 28,200 into view.

Oil is the other piece we cannot ignore. WTI crude is hovering around $100 as Middle East supply risks and refining constraints keep the physical market tight.

WTI’s trend is particularly well captured by the 20-day EMA (1sd) band, displayed in orange.

Bottom line

If headline CPI is hot but core stays near 0.2%, the first move could still be lower for equities, but an energy-led surprise is easier for markets to look through.

If core CPI prints 0.3% or higher, hike odds and Treasury yields likely move higher, with the Nasdaq facing the clearest pressure.

If core CPI comes in soft, yields can ease, hike odds can come down and equities get room for a relief move.

PPI showed us where the pressure is building. CPI now tells us whether it has reached the consumer.