Today's US inflation report could decide whether the Federal Reserve follows September's rate hike with another before year end. Here is what economists expect, which number matters most, and how the result could move rates and stocks.
When the data lands
The US Bureau of Labor Statistics releases September's Consumer Price Index (CPI) today, Wednesday October 14, at 8:30am ET (1:30pm UK time). It is one of the last inflation readings the Federal Reserve will see before its October 28 policy decision, along with tomorrow's Producer Price Index.
What economists expect
- Headline CPI: +0.5% to +0.6% month on month (August: +0.4%). That would lift annual inflation to about 3.6%, up from 3.4%.
- Core CPI (excluding food and energy): about +0.2% month on month (August: +0.3%). Annual core is expected around 2.4% to 2.5%.
The story is a split. Energy is pushing the headline number up, with Middle East tensions keeping crude oil near $100 a barrel and lifting gasoline prices. Underlying price pressure is expected to keep cooling. Consensus figures come from FactSet, Wall Street Journal and Newsquawk surveys published ahead of the release.
Why core matters more today
The headline jump is largely expected, so markets are likely to focus on core inflation. A core reading near 0.24% or higher would suggest that energy costs are spreading into other goods and services, for example through diesel and transport costs. A soft core reading, around 0.16% to 0.18%, would support the view that the price spike comes from the energy shock and should fade.
What it could mean for the rate path
The Fed raised rates by a quarter point in September, to 3.75% to 4.00%. It was the first increase in three years, and officials signalled at least one more hike. After a weak September jobs report, markets see little chance of a move at the October 28 meeting. Attention has shifted to December 8–9, where prediction markets were recently pricing a high chance of another 25bp hike.
- Hot core print: December hike expectations firm up, short-dated Treasury yields and the dollar rise, and rate-sensitive stocks (growth tech, housing, small caps) come under pressure.
- In-line print: the Fed likely holds in October, and the December debate stays open until the October and November data.
- Soft core print: markets may trim bets on tightening beyond this year, which would help bonds and long-duration growth stocks.
What it means for earnings season
Q3 earnings season is just getting started. Big banks reported yesterday, and Bank of America and Morgan Stanley are among the next names to watch. Higher rates and fuel costs make guidance on consumer spending and margins especially important this quarter. Follow every upcoming report on the Earnings Compass calendar and screener.
This article is for information only and is not financial advice.