Key facts
- Economists expect September's US inflation rate to accelerate to 3.6% from 3.4% in August.
- Inflation outpacing wage growth for the sixth straight month would occur if the CPI exceeds 3%.
- September's year-over-year wage gain was the lowest since 2021.
- The Fed made its first rate hike since 2023 in September to combat high inflation.
- Markets see an almost 80% chance the Fed will hold rates steady at the October meeting.
- There is a roughly 90% chance of at least one rate hike by the final meeting in December.
Economists are anticipating an acceleration in US inflation for September, with the consumer price index (CPI) expected to rise to 3.6% from 3.4% in August. The Bureau of Labor Statistics is set to release the report at 8:30 a.m. ET. If the CPI indeed surpasses 3%, it would mark the sixth consecutive month where inflation has outpaced wage growth, as average hourly earnings have been on a downward trend, with September's year-over-year gain being the lowest since 2021.
ZipRecruiter economist Nicole Bachaud highlighted that for middle- and lower-income households, rising costs for essentials like gas and groceries consume a larger portion of their income. This impact is particularly felt as winter approaches, increasing heating costs.
The Federal Reserve implemented its first interest rate hike since 2023 in September to address persistent inflation. While another hike before year-end is possible, current market probabilities, as tracked by CME FedWatch, suggest an almost 80% chance the Fed will maintain current rates at its October meeting (27th-28th). There is a higher probability, around 90%, of at least one rate increase by the final meeting of the year in December.
Minutes from the September Federal Open Market Committee meeting revealed concerns among participants about inflation remaining above the Fed's 2% target. Factors contributing to these inflationary pressures include geopolitical developments, such as the ongoing Iran war, which have driven up crude oil and refined fuel prices, as well as significant investments in AI. Some participants also noted that potential future tariff increases could exacerbate these pressures.