CPI, mortgage rates and rate hike bets are all on the rise
SPY•U.S. consumer prices rose 0.6% in September and 3.7% year over year, while the average 30-year mortgage rate reached 7.50%. Markets increased the implied probability of an October rate hike to 47.1%, from 22.1% the previous day.
1. Inflation accelerates
The Consumer Price Index rose 0.6% in September, up from 0.4% in August, and increased 3.7% from a year earlier, compared with 3.4% in the prior month. Core CPI rose 0.3% monthly and 2.6% annually; both readings exceeded analyst expectations. Energy prices jumped 5.2% in the month, including a 9.1% increase in gasoline prices.
2. Rate hike expectations
Markets priced in a 47.1% chance of an October rate hike, up from 22.1% the previous day. The implied probability of a 50-basis-point increase in December rose to 42.0%, from 18.7% on Tuesday. Peter Cardillo of Spartan Capital Securities said inflation accelerated and remained a problem for the Federal Reserve.
3. Mortgage demand weakens
The average 30-year fixed mortgage rate rose one basis point to 7.50%, its highest since November 2023. Total home loan demand fell 2.7% last week, with purchase applications down 4.0% and refinancing applications down 0.4%. Adjustable-rate mortgages accounted for 10.5% of applications, their highest share since October 2025.
