CPI Data Preview: Will inflation data support more interest rate hikes?

Markets are eagerly awaiting September’s Consumer Price Index (CPI) report, with the Bureau of Labor Statistics set to release the report on Thursday. The unexpected rise in September’s Producer Price Index (PPI) has heightened anticipation for the upcoming Consumer Inflation Index, especially with the Federal Open Market Committee (FOMC) meeting scheduled for Oct. 31-Nov. 1.

However, market expectations remain firmly anchored regarding future interest rates. Fed futures pricing implies a 92% chance of no rate change next month and a 72% chance of no change in December. Economists largely anticipate modest readings for September’s CPI report.

The headline inflation rate is projected to decrease from August’s 3.7% annual rate to 3.6% in September, with a monthly increase of 0.3%. Core inflation, which excludes energy and food, is forecasted to decline from August’s 4.3% annual rate to 4.1% in September, marking the lowest core CPI reading since September 2021.

On a monthly basis, core CPI is anticipated to advance at a 0.3% pace, maintaining the same trend as August. Monthly core CPI inflation is likely to remain in the 0.2-0.3% range in the coming months, reflecting moderation in shelter inflation and used car prices. However, a positive swing in the CPI’s health insurance component may offset this overall image.