The latest data shows that the U.S. Consumer Price Index (CPI) showed a moderate rise in August, with core inflation beating expectations and having a significant impact on traders and investors in all types of markets.

The CPI rose 0.2% on a seasonally adjusted basis in August, the same increase as in July. Year-over-year inflation was 2.5%, the lowest 12-month increase since February 2021. However, core CPI, which excludes food and energy prices, rose 0.3%, up from 0.2% the month before.

Housing costs became a major driver of inflation, rising 0.5% in August. This subcomponent accounts for more than 70% of the annual increase in core CPI. Other notable areas of increase included a 3.9% rise in air fares; a 0.6% rise in motor vehicle insurance; and increases in both education and apparel.

The food index rose a modest 0.1%, with the cost of eating out rising 0.3%. However, energy prices fell 0.8%, with gasoline, electricity and natural gas prices all declining. Over the past year, the energy index has declined 4.0%, with gasoline prices falling 10.3%.

The higher-than-expected core inflation rate suggests ongoing price pressures in the economy. This data is critical for traders and could influence the Federal Reserve's future monetary policy decisions.

Given the strong performance of core inflation, it is prudent to remain cautiously bullish on the U.S. dollar in the near term. Bond yields are likely to face upward pressure, which in turn will affect stock market performance. Traders should pay close attention to the Fed's future policy communications for the potential impact of this inflation data.