Hot September CPI sends rate-hike bets soaring
SPY•U.S. consumer prices rose 0.6% in September and 3.7% year over year, while core CPI increased 0.3% monthly and 2.6% annually. Markets raised the implied chance the Federal Reserve will hold rates at its next meeting to about 49%, from 19% before the report.
1. Inflation picks up
The Consumer Price Index rose 0.6% in September after increasing 0.4% in August, and was up 3.7% from a year earlier. Economists had forecast a 0.6% monthly increase and a 3.6% annual gain. Gasoline prices surged 7.1% during the month.
2. Core prices and markets
Excluding food and energy, CPI rose 0.3% for a second month and 2.6% year over year, up from 2.4% in August. U.S. stocks opened lower, while Treasury yields rose; the two-year yield gained 13 basis points to 4.92% and the 10-year yield rose 9 basis points to 5.304%. Futures priced about a 49% chance the Fed would keep its policy rate at 3.75%-4% at its meeting in two weeks, compared with 19% before the report.
