Inflation Concerns Rise Ahead of Key Consumer Price Index Report
- September’s consumer price index is expected to rise by 0.6% month-over-month and 3.6% year-over-year.
- Core inflation, excluding food and energy, is projected to increase by 0.2% since August, reaching 2.5% annually.
- Producer price index is set for release Thursday, anticipated to rise by 0.6% from August to September and 5.5% annually.
Severe inflationary pressures continue to loom, fueled by escalating energy costs. The consumer price index (CPI) for September, a closely monitored economic indicator, is expected to reflect a 0.6% increase from the previous month and a 3.6% rise compared to the same period last year. This annual figure suggests an accelerating rate of price growth that strays further from the Federal Reserve’s target of 2%.
Core inflation, which excludes volatile food and energy prices, is anticipated to grow by 0.2% from August and show a 12-month increase of 2.5%. Although this indicates a slight deceleration from the month prior, it represents a year-over-year uptick.
Upside Risk
Joe Brusuelas, chief economist at RSM, notes that oil-related prices may push the headline inflation figure higher. Energy costs have been significant contributors to inflation since the U.S. conflict with Iran commenced earlier this year. Recently, President Donald Trump announced a loosening of diesel restrictions on Russia to stimulate the global oil trade; however, analysts remain skeptical that this will substantially lower prices.
Brent crude, the global oil benchmark, rose over 14% in September, culminating in a nearly 42% increase for the third quarter. As of Tuesday, Brent was priced at approximately $105 per barrel. Brusuelas warned, “We’ve got real upside risk on the September CPI. Typically, when we have these moves in inflation, everyone’s models undershoot the actual outcome.”
Persistent oil prices may also lead to increased costs in various non-energy sectors, according to Robert Sockin, chief U.S. economist at PGIM. This scenario complicates the Fed’s ability to dismiss the surge in energy prices as a short-lived shock, which could necessitate adjustments in interest rate policies.
After implementing its first interest rate hike in three years, the Federal Reserve indicated in its recent meeting minutes that additional rate increases are likely. Fed funds futures traders expect another rate hike at the upcoming December policy meeting.
The CPI report due Wednesday is the final reading before the November midterm elections, which could influence the Republican party’s control in Washington. According to the University of Michigan’s consumer sentiment data, economic confidence has declined across political affiliations this year, with Republican and independent voters showing steeper decreases compared to Democrats since early 2026.
On Thursday, the producer price index, which gauges inflation facing wholesalers, is expected to increase by 0.6% from August to September and by 5.5% on a year-over-year basis, indicating a modest acceleration from the previous month’s growth rate.
News Courtesy of CNBC
