US consumer inflation tops forecasts, pressure on Fed
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The news: US inflation rose slightly more than expected in September, with consumer prices increasing 0.2% from the previous month and 2.4% year-on-year, the US Bureau of Labor Statistics said.
The context: The September move came slightly above the 0.1% increase expected for the month, and the 2.3% rise forecast for the year by economists polled by Reuters.
The moderation follows an inflation peak of 9.1% in June 2022 and may back a smaller cut by the Federal Reserve at its next meeting, with the figures reflecting a slower and uneven progress in the fight against inflation.
The Federal Reserve delivered a 50-basis-point rate cut in September to support the labour market, but signs of inflation persistence have led economists to expect a smaller 25 basis point cut at the November meeting.
The data also follows a strong US jobs report, with the unemployment rate falling to 4.1% last month.
The numbers: Prices overall rose 0.2% monthly, with food, housing and services driving the increase.
Core inflation, which excludes food and energy, increased 3.3% year on year and 0.3% over the month, matching August’s increase.
The shelter index rose 0.2% in the month to be up 4.9% for the year.
Food prices increased 0.4%, driven by a 0.8% rise in meats, poultry, fish and eggs, with eggs alone spiking 8.4%. The food away from home index also increased by 0.3%.
Energy prices fell 1.9%, with gasoline down 4.1%, and the energy index decreased by 6.8% over the past 12 months.
The S&P 500 traded lower, and two-year Treasury yields declined while the dollar weakened. Traders adjusted their bets, with the probability of a 25-basis-point Fed rate cut in November rising to roughly 76%, according to CME Group’s FedWatch Tool.
What they said: “It’s a disappointment, but inflation’s descent was going to be bumpy,” said Ryan Sweet, chief US economist at Oxford Economics.
“Inflation is dying, but not dead,” said Olu Sonola, head of US economic research at Fitch Ratings. “Coming on the heels of the surprisingly strong September employment data, this report encourages the Fed to maintain a cautious stance with the pace of the easing cycle.”
The sources: US Bureau of Labor Statistics, Bloomberg, The Wall Street Journal
