US CPI Data: Will September inflation numbers throw a surprise for the markets?

The Bureau of Labor Statistics will release the US CPI data for September today. The US inflation numbers for September will be published on October 10 at 8.30 am ET.

In August, US CPI increased 2.5 percent annually and 0.2 percent monthly while the core inflation (all items less food and energy) rose 0.3 percent monthly and 3.2 percent over the last 12 months.

US CPI is expected to show an increase at an annual rate of 2.3% in September, down from the 2.5% rise reported in August. The core CPI inflation, which excludes volatile food and energy prices, is forecast to stay unchanged at 3.2% in the same period.

Meanwhile, the CPI and core CPI are expected to grow 0.1% and 0.2% per month, respectively.

Investors anticipate that the US central bank will choose to reduce the amount of easing by choosing to decrease the policy rate by 25 basis points (bps) at the next meeting, following the Fed’s decision to lower the rate by 50 bps at the September meeting. For the time being, the possibility of a 50 basis point rate drop in November is totally ruled out, according to the CME FedWatch Tool.

September employment data eased concerns about a labor market cooling, causing investors to avoid large rate cuts. Nonfarm Payrolls rose by 254,000, surpassing market expectations. Unemployment Rate retreated to 4.1%, and annual wage inflation edged higher to 4% from 3.9% in August.

IBKR ForecastTrader participants, appear to have a muted outlook for inflation, pricing a 37% probability that September’s headline CPI will exceed 2.3%. Turning to the core category, however, participants are expecting a higher than consensus figure, with a 53% chance of a figure north of 3.2%.

If inflation numbers come-in against expectations and shows either stickiness or a spike, the US fed could get in a tougher spot.

S&P 500 is up nearly 33% over 12 months and Dow 30 is up by 25% over the same period.

The next 3-4 weeks could witness a higher volatility as new economic data flow in leading up to the October US CPI data releasing on November 13 and US elections 2024 deciding the White House occupant on November 5. IBKR ForecastTrader participants for the dead heat presidential election, folks still expect Vice President Harris to occupy the Oval Office as she’s favored with odds of 52%. The next FOMC meeting takes place on November 6-7.

José Torres, Senior Economist at Interactive Brokers says, “Stocks are extending their yearly gains ahead of today’s first read on US inflation for the month of September. Investors are also gearing up for earnings season, which kicks off this Friday, and folks are eager to hear about last quarter’s profits and the outlook for profitability.”