September CPI Surpasses Expectations With a 3.7% Increase: How Will the Fed React?

The US Bureau of Labor Statistics (BLS)’s September consumer price index (CPI) report showed that the headline inflation rate sat at 3.7% in September, surpassing the consensus estimates of 3.6%. Core CPI matched expectations with a year-over-year increase of 4.1%, down from the 4.3% reported in August. 

Annual Inflation Rate Unchanged From August, Core CPI Matches Expectations

The new CPI data released on Thursday revealed that the annual inflation rate in the US rose to 3.7% in September, exceeding economists’ expectations of a 3.6% increase. The figure means the annual CPI remained unchanged from the August rate. 

On a monthly basis, inflation rose by 0.4%. This compares to a monthly change of 0.6% in the August CPI report and economists’ projections of a 0.3% rise. 

Annual Core CPI, a key metric of inflation that excludes volatile food and energy prices, stood at 4.1%, matching the projected 4.1% and slightly down from the earlier 4.3% rise. Monthly, core CPI climbed by 0.3%, also in line with what economists projected and the earlier core CPI reading. 

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S&P Loses Some Premarket Gains, Dollar Advances

In the wake of the report, the financial markets reacted with the S&P 500 futures trimming their premarket gains to 4,427. The Dow Jones Industrial Average (DJIA) opened rose to 34,153 in the market pre-open before retreating to 34,135.

The tech-oriented Nasdaq 100 stood at 15,431, down from 15,448 earlier in the premarket. The 10-year US Treasury yield sat at 4.60%, slightly falling to 4.71%. 

In the foreign exchange market, the US dollar gained about 0.2% against the Japanese yen to 149.4 and over 0.4% versus the euro. The British pound sterling slipped 0.45% against the greenback to 1.22.

The latest CPI report once again highlighted that inflationary pressures are notably tough to tame, with the annual rate standing at the same level where it was a month ago despite record-high interest rates. Last week, the Federal Reserve officials said there may be no need for further hikes this year. However, it would be no surprise if this report, coupled with the recent red-hot jobs data, stimulates the central bank to deliver another quarter-point increase before the end of the year. 

How do you think the Federal Reserve will react to the latest CPI report? Let us know in the comments below.