US Inflation: All eyes on CPI data to be released today

Today all eyes are on US CPI data and how it aligns with the Fed’s recent shift in stance on the necessity of additional rate hikes. The most recent set of US inflation numbers will be released by the U.S. Bureau of Labor Statistics today. The September 2023 CPI data are scheduled to be announced on October 12, 2023, at 8:30 A.M. Eastern Time.

The September US CPI report is of special relevance because opinions disagree on whether the Fed will raise interest rates again in November. While another 25 bps rate hike is expected this year, any further stretch may put pressure on the economy that looks to sail more or less smoothly as of now.

“As we look ahead to today’s Consumer Price Index, market players are unlikely to take a stronger-than-expected figure lightly. I’m expecting a 0.4% increase, led by rising food and gasoline costs. Persistent services inflation and rising prices for used and new automobiles will likely contribute to upside risks as well.

A 0.4% gain in the CPI is unlikely to catapult the Fed toward another hike, but a number of greater magnitude — against the backdrop of recent big beats on payrolls and the PPI — may lay the case for one more,” says José Torres, Senior Economist at Interactive Brokers.

The September Producer Price Index (PPI) has already thrown a surprise to the market. The September PPI showed that wholesale prices grew 0.5% month over month (m/m), exceeding the consensus estimate of 0.3%.

However, September’s performance slowed from August’s 0.7% rate as energy cost hikes slowed. Excluding food and energy, the core figure increased 0.3% m/m, exceeding expectations for a 0.2% increase from August’s 0.2%. The m/m beats resulted in a large increase in year-over-year (y/y) data, with headline prices up 2.2% y/y and core items climbing 2.7% y/y, both exceeding expectations of 1.6% and 2.3%.

The Federal Reserve’s policymakers are feeling hopeful that the past 19 months of historic interest rate hikes intended to curb inflation may finally come to a stop due to an increase in long-term Treasury yields.

Wall Street is likewise feeling optimistic that monetary policy won’t tighten any further. The CME FedWatch Tool indicates that there is less chance that the Fed will raise interest rates again in November.

At its upcoming policy meeting, which will take place from October 31 to November 1, the US central bank is expected to hold interest rates steady by over 90% of market participants. Markets only had those chances at 57% a month ago.