Fed rate hike call seen tight as inflation heats up
TLT•U.S. consumer prices rose 3.7% in September from a year earlier, while core CPI increased 2.6%, above the 2.5% forecast. Interest-rate futures put the odds of an October Fed rate hike at around 50-50.
1. Inflation broadens
Consumer prices rose 3.7% year over year in September, with higher gasoline prices a main driver. Core CPI, excluding food and energy, rose 2.6%, above the 2.5% economists polled had forecast.
2. More price pressures
Software prices increased 28% from a year earlier, the largest increase on record, while toy prices also posted a record rise. An analyst said the strength across several components was broad-based; another said it could raise the probability of an October rate increase.
3. Fed decision in focus
Interest-rate futures shifted to around even odds of an October hike after the data. Fed policymakers are also weighing the risk that tighter policy could slow the labor market, where job gains have cooled.
