Copper extended its decline from a record high as accelerating US inflation reduced the chances of rate cuts and a stronger dollar made the metal more expensive for many buyers. The industrial metal was down around 3% from its closing price on Wednesday. This followed an eight-day period of gains that had been driven by mine supply concerns.
Separately, other market reactions to the hot inflation data included gold edging lower, trading near $4,340 an ounce after falling for a third consecutive week. Underlying inflation, as measured by the core consumer price index, increased 0.3% from the previous month. The overall consumer price index rose 0.4% from July and 3.4% annually in August. Core inflation, excluding food and energy, was 0.3% for the month and 2.4% year-over-year. Energy costs, particularly a 3.9% jump in gasoline prices and a 10.1% surge in fuel oil, significantly contributed to the headline inflation number.
Markets are now pricing in an 86% to 90% chance that the US Federal Reserve will raise interest rates by 25 basis points at its upcoming meeting this week, which would be the first hike since mid-2023. Economists from JPMorgan and Barclays anticipate two rate hikes this year, in September and December. The Fed's preferred inflation gauge, the Personal Consumption Expenditures price index, has been above its 2% target for over five years, and the federal funds rate currently sits at 3.5% to 3.75%.
