Notes From the Desk – US CPI – The Devil is in the Details
Surging energy prices pushed the headline September CPI a touch higher than expected. While media outlets will flash the headline number, the devil is in the details, and that is what the Federal Reserve will be paying attention to.
The numbers.
- YoY headline CPI 3.7% (3.6% expected)
- YoY core CPI came in at 4.1%, as expected
The Details.
- Goods prices continue to fall, led by a 2.5% decline in used car prices. Stripping out used cars, core goods prices fell 0.1%
- Service prices continue to be sticky as they accelerated from 0.37% MoM to 0.57% MoM in September.
- On a three-month annualized basis, core service prices have risen 5.4%
The Implications.
The path to 2% inflation is a bumpy one. Today’s data does little to settle the debate about whether the Federal Reserve hikes again this year; however, it does weaken the case for rate cuts in 2024.
Bond yields are rising slightly, with short-end rates moving more than long-end rates. A move higher is tempered by the flight to safety sparked by the situation evolving in Israel.
