Announced this morning, the Consumer Price Index increased 0.4% in September and is 8.2% higher on an annual basis, both higher than expected. Monthly prices for Utility Gas Service (natural gas), up 2.9%, Transportation Services, up 1.9%, and Shelter, up 0.7%, were all relatively strong, while Gasoline, down -4.7%, was weak. The core rate, which excludes prices for food and energy, increased 0.6% in September, also more than expected, and is up 6.6% on an annual basis, which is the largest annual increase in the core rate since 1982.
Overall, inflation remains elevated with higher monthly increases than expected in both the headline and core consumer price index. Coupled with a resilient labor market per last week’s payrolls report, the Federal Reserve should remain heavily focused on increasing rates and reducing their balance sheet in the coming weeks. Meanwhile, other parts of the economy are weakening amidst this backdrop, including housing and manufacturing. The balance of when tightening financial conditions reduces inflation versus causes a deterioration in the labor market will be key for the economy in the months ahead.
In all, the 10-year US treasury yield ticks higher following the report and equity futures are lower as we head into the market open.
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