US consumer inflation accelerated more than expected last month, helping lift market expectations for at least one more move in the Federal Reserve’s tightening cycle. According to data published by the Bureau of Labor Statistics this morning, the headline consumer price index rose 3.7 percent in September from the same period last year, up 0.4 percent on a month-over-month basis. This was slightly hotter than consensus estimates among economists polled by the major data providers ahead of the release – which were set at 3.6 percent and 0.3 percent, respectively. A rise in housing costs contributed more than half the monthly gain, and gasoline prices provided most of the remainder of the jump. With highly-volatile food and energy components excluded, prices rose 0.3 percent on a month-over-month basis in September, up 4.1 percent over the previous year, and aligning perfectly with consensus forecasts. Equities are tumbling and short-term Treasury yields are rising as markets raise odds on a final rate hike this year, and push rate cut expectations forward in 2024. The dollar is pushing higher against its major counterparts. Bottom line: We expect next month’s headline print to subside as falling gasoline prices weigh on the all-items calculation, and we think the Federal Reserve is done hiking rates for this cycle. But with the Israel-Hamas conflict raising headline inflation risks, we suspect today’s number will help keep implied policy rates in restrictive territory for longer, raising the risk of a sharper slowdown in the US and global economies by the first quarter of 2024. |
Latest Analysis
Latest Analysis
Dollar recovery extends
08 October, 2025
The dollar is steamrolling over its major counterparts again this morning as investors unwind exposures in other jurisdictions and pile into bets on continued gains in American equity markets. The trade-weighted...
RBNZ: not done yet
07 October, 2025
The “Go Big or Go Home” mentality was on display once again in NZ today after the RBNZ delivered an outsized 50bp interest rate cut as it attempts to jolt the stuttering economy back to life. The decision...
Markets rally on AI hopes, yen continues its descent
07 October, 2025
Investors are making up for a lack of actual intelligence on the state of the economy by betting on artificial intelligence instead. The dollar is attracting inflows, mid-curve Treasury yields are pushing...
Japanese market jolt
06 October, 2025
• Push-pull forces. US shutdown still in place. Geopolitics outside US generates some vol. EUR & JPY lose ground. AUD & NZD edge up a little.• Japan politics. Shock leadership selection jolted...
Political turmoil plays havoc with currency markets, boosts dollar
06 October, 2025
The dollar is again winning the cleanest-dirty-shirt contest this morning as mounting political turmoil in Japan and the euro area casts a pall over currency markets. The yen is down almost 2 percent and...
Currency trading ranges shrink as markets continue to ignore shutdown risks
03 October, 2025
Rumours of the dollar’s shutdown-inflicted death have been greatly exaggerated. The greenback is holding firm against its major rivals this morning despite confirmation that the US government will remain...
US shutdown vacuum
01 October, 2025
• Holding on. Markets take the latest US shutdown in stride. US equities edged up while bond yields slipped back. USD & AUD tread water.• US shutdown. No real sense of urgency to strike a deal quickly....
Another US government shutdown
30 September, 2025
• Holding firm. US equities ticked up overnight, while bond yields consolidated & USD weakened. AUD rose with AUD also outperforming on the crosses.• RBA holds. No change by RBA. Comments leant more...
RBA: any more easing left?
30 September, 2025
As widely anticipated, particularly after last week’s hotter monthly Australian CPI figures, the RBA kept the cash rate at 3.6% at today’s meeting. The Board’s decision was unanimous, and there was little...
US government shutdown looming
28 September, 2025
• Risk uptick. US equities ended a 3-day losing streak on Friday. USD eased back. AUD & NZD tick up. No change expected by RBA this week.• US shutdown. US politics in focus with another shutdown looming....