Citi expects the core Consumer Price Index (CPI) to rise by 0.31% month-on-month, indicating a slowdown in inflation overall. They believe inflation in services and housing will decrease, while core goods influenced by tariffs are becoming stronger. Deutsche estimates a core CPI increase of 0.32% month-on-month, noting that tariffs are still impacting core goods. They predict strong inflation in these areas, particularly in clothing.

Goldman Sachs Core CPI Estimate

Goldman Sachs forecasts a 0.36% rise in core CPI month-on-month. They attribute this increase to tariffs affecting communication, household items, and recreational goods, which add 0.14% to overall inflation. They expect headline inflation to be at 0.37%, thanks to higher food and energy prices. ING projects a core CPI increase of 0.3% month-on-month, driven by price inflation from tariffs on goods. They point out that core goods make up 19% of the inflation total, while housing costs, which represent 33%, may show weaker rent prices. Nomura anticipates a core CPI rise of 0.34% month-on-month, with core goods inflation contributing 0.48%, the fastest increase since June 2022. They expect strong price inflation in non-auto goods due to tariffs. Wells Fargo predicts a 0.29% rise in core CPI month-on-month, with persistent inflation in services and a rebound in goods prices. They see increases in inflation for both core goods and services, influenced by new vehicle costs and travel services.

Tariff Impact on Goods Prices

Today’s August 2025 Core CPI is expected to be around +0.3%, mainly due to a rebound in goods prices. This follows the White House’s announcement of new 15% tariffs on various consumer electronics and clothing in late July 2025. The focus will be on how much these tariffs have raised prices in communication and household goods. However, beneath this spike, the overall trend seems to be cooling, especially in services and housing. Recent data from Zillow and Apartment List for August 2025 shows a continued slowdown in national rent growth, which should result in lower official shelter inflation. This situation creates a contradiction between the tariff-driven rise in goods prices and the softening prices in other areas. This scenario suggests a strong reaction from the Federal Reserve, likely paying close attention to the overall numbers. Following Fed Chair Powell’s remarks at the Jackson Hole symposium in late August 2025 about staying alert, derivative traders might want to consider positions that benefit from an increase in short-term rate volatility. Options on SOFR futures could effectively capitalize on any overreaction to these figures. The August jobs report showed payroll growth slowing to 150,000, indicating that the wider economy may already be cooling. This makes it challenging for the Fed to maintain a consistently aggressive stance. Therefore, a yield curve flattener trade, betting on short-term rates rising faster than long-term rates, appears appealing in the coming weeks. This would reflect market expectations of a near-term Fed response to tariff-induced inflation while also anticipating economic weakness ahead. We also see potential in equity derivatives, particularly in sectors most affected by the new tariffs. With corporate margins in consumer discretionary and tech hardware likely under pressure, buying puts on relevant sector ETFs could provide a good hedge. This strategy is especially wise for companies that have struggled to pass on rising costs to consumers over the past year. Create your live VT Markets account and start trading now.

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