US inflation heats up in September; Fed rate hike this month back on table
SPY•The Consumer Price Index rose 0.6% in September and 3.7% year over year, while core CPI increased 0.3% for the month and 2.6% over 12 months. Markets raised the chance of a Federal Reserve rate hike this month to about 37%, from 22% before the report.
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. Gasoline prices surged 9.1%, accounting for more than half of the monthly increase. Core CPI, excluding food and energy, rose 0.3% for the month and 2.6% year over year.
2. Broader price pressures
Services prices rose 0.4%, with shelter up 0.4%; core goods prices increased 0.3%, including a 0.7% rise in used cars and trucks. Prices for computers and peripherals jumped 1.3%, reflecting AI-related investment. Average hourly earnings for all employees fell 0.7% from a year earlier.
3. Rate expectations shift
Markets raised the probability of a rate hike at the Federal Reserve’s October 27-28 meeting to roughly 37%, from about 22% before the report. Most economists still expect the Fed to hold rates steady this month and raise them in December. The Fed raised its benchmark rate by 25 basis points in September to a range of 3.75%-4.00%.
