Economists Christopher Hodge and Selin Aker noted that inflation was broad-based, with recreation, education, and communication commodities fueling a 0.25% rise in core goods prices. Shelter costs also contributed to the upward momentum, climbing 0.37% due to higher rents and hotel rates. While the 'supercore' index softened slightly to 0.42% compared to August, the overall breadth of the September data has dented the confidence of those expecting a steady downward trajectory for U.S. inflation.
September CPI surge revives debate over October Fed rate hike
September’s inflation figures arrived significantly hotter than market expectations, shattering the narrative that summer price pressures were merely a temporary outlier. With gasoline costs driving a 0.6% monthly headline increase, economists at Natixis now argue that the data is disruptive enough to put an October Federal Reserve rate hike back on the table.
Fed Chair Kevin Warsh has previously signaled a preference for 'live' meetings, and the latest report provides the necessary ammunition for hawkish committee members to push for immediate action. Although Hodge and Aker maintain that a pause in October remains the more prudent course—citing the need to assess economic variables and avoid political complications ahead of early November mid-term elections—the threat of a surprise hike looms. If market expectations continue to lean toward a tightening move, the FOMC may feel compelled to act rather than risk a market-disrupting hold.
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