Macro Flash Report

Consumer Price Index (CPI)

Takeaway:

September’s CPI and Core CPI both exceeded market expectations, signaling a pause in the progress toward easing inflation as shelter, transportation services, and food costs remain elevated. The higher-than-anticipated inflation, coupled with stronger-than-expected payroll numbers, will likely fuel discussions about the Federal Reserve’s next steps, raising questions of whether a small interest rate cut, or pause may be necessary to contain underlying inflation pressures.

CPI YoY – Topline (Dotted) & Core (Solid)

In September, the Core (Ex Food & Energy) CPI rose by 0.3%, picking up from the 0.2% increase in July and surpassing market expectations of 0.2%.

  • Shelter costs continued to persist (0.4% vs 0.4%) and accelerated sharply for transportation services (1.4% vs 0.9%).

On an annual basis, Core CPI edged up to 3.3%, up from the three-year low of 3.2% in the last two months, and ahead of the forecasts of holding steady at 3.2%.

  • Services less energy services (4.7%) rose sharply, which is closely monitored by the Fed for underlying inflation.

The headline CPI increased by 0.2%, unchanging from August’s 0.2% rise yet above the anticipated 0.1%.

  • Food prices were the main driver of this increase, which came in hotter than the easing seen in gasoline and energy costs.

Annually, the overall CPI rose by 2.4%, a tick down from 2.5% in the month prior, however above the projected decline to a 2.3% increase.

Notably, this is the first time since March that payrolls and CPI have both come in over market expectations.