Key facts
- Economists predict US headline inflation rose 0.5% month-over-month and 3.6%-3.7% year-over-year in September.
- Core CPI is expected to increase 0.2% month-over-month, with the annual rate holding at 2.4%.
- The probability of a Federal Reserve interest rate hike at the upcoming meeting is around 19%-20%.
- Brent crude for December delivery fell to $104.60 per barrel.
- WTI crude for November delivery declined to $91.89 per barrel.
- US gasoline prices averaged $4.3413 per gallon on Tuesday.
Economists anticipate that key U.S. inflation metrics continued to moderate in September, even with oil prices remaining elevated above $90 per barrel. The U.S. Consumer Price Index (CPI) report, due Wednesday, is expected to show headline inflation growth of 0.5% month-over-month and 3.6%-3.7% year-over-year, an increase from August's figures. Core CPI, excluding volatile energy and food prices, is projected to climb 0.2% in September, with the annual rate holding steady at 2.4%.
This outlook has contributed to a significant drop in the probability of a Federal Reserve interest rate hike at the upcoming October 27–28 meeting, now estimated at around 19% to 20%, down from over 70% in late September. Jeffrey Schulze, head investment strategist at the Franklin Templeton Institute, noted that while supply shocks have created a "sticky situation," these risks may begin to moderate, with softening already potentially underway.
Despite rising crude prices, broader core inflation categories have remained insulated. Airfares, however, have absorbed energy shocks, with price increases exceeding 2% month-over-month in July and August due to elevated jet fuel costs. Schulze suggested that pass-through effects for most retail and manufacturing sectors might appear closer to the end of the year.
U.S. oil and fuel prices have seen a slight decrease from recent highs but remain elevated. Brent crude for December delivery fell 2.0% to $104.60 per barrel, and WTI crude for November delivery declined to $91.89 per barrel. The average U.S. gasoline price was $4.3413 per gallon on Tuesday, down from a month ago but significantly higher than before the conflict in Ukraine. Diesel prices have remained relatively stable, averaging $6.2787 per gallon.
Last week, U.S. President Donald Trump and Russian President Vladimir Putin agreed to a deal for Russia to supply Russian diesel to U.S. and global markets. Russia pledged to release over 300,000 metric tons of diesel fuel immediately, with further deliveries scheduled. The U.S. Treasury Department issued a general license suspending sanctions on Russian diesel exports until April 7, 2027. However, the deal has faced bipartisan opposition in Congress and criticism from European leaders, who argue it violates existing bans on Russian energy imports. Energy experts also noted that the initial delivery volumes are unlikely to significantly impact global fuel prices, especially given the reduction in Russian diesel production due to Ukrainian drone and missile strikes.