Key facts
- US consumer prices rose 3.7% year-on-year in September.
- The Consumer Price Index increased 0.6% on a monthly basis in September.
- Gasoline prices soared 7.1% in September.
- Core CPI rose 0.3% monthly in September, reaching 2.6% year-on-year.
- Investor expectations for a Federal Reserve interest rate hike increased significantly.
US consumer prices accelerated in September, with the Consumer Price Index (CPI) rising 0.6% from the prior month and 3.7% year-on-year, according to a Labor Department report. This surge was primarily driven by a 7.1% increase in gasoline costs, while food prices also contributed to the rise.
Excluding volatile food and energy components, the core CPI gained 0.3% in September, matching the gain in August. In the 12 months through September, core CPI inflation increased 2.6% after advancing 2.4% in August. The US central bank tracks the Personal Consumption Expenditures Price Index for its 2% inflation target.
The hotter-than-expected inflation data led to a sell-off in US stocks, with futures on the Nasdaq down 0.6% and futures on the S&P 500 off 0.4%. Bond yields rose sharply, with US two-year yields up 15.7 basis points to 4.95% and the benchmark 10-year yield up 11 basis points to 5.325%. The US dollar index climbed 0.55% to 102.75.
Investor expectations for a Federal Reserve interest rate hike increased significantly. Futures pricing the Fed's policy rate now indicate about a 49% chance of the central bank keeping rates in its current 3.75%-4% range at its next meeting, up from 19% before the report.