What key inflation data prompted traders to increase the probability of a Fed rate hike at the September 15–16 meeting, and how did that probability change?

Traders increased the probability of a quarter-point rate hike at the Fed's September 15–16 meeting from about 65% to closer to 70% after the August Producer Price Index (PPI) showed U.S. producer prices rose 5.4% year-over-year, with notable increases in transportation and warehousing, hospital services, and airfares—suggesting some recent disinflation may be reversing due to Middle East hostilities and surging AI-related electronics demand.

Why is Friday's Consumer Price Index (CPI) report considered decisive for the Fed's September decision, according to the article?

Friday's CPI report is considered decisive because it will 'fill out the inflation picture for Fed officials as they debate whether their policy rate is putting enough downward pressure on inflation to get it to their 2% goal,' and analysts were divided on whether the PPI data alone would push estimated PCE inflation high enough to force a hike—making the 'more important core CPI figure' the key determinant for a potential move next week.

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