Key facts
- September core CPI rose 0.3% month-on-month, exceeding the 0.2% consensus estimate.
- Headline CPI rose 0.6% in September, as expected.
- Core annual CPI of 2.6% topped 2.5% expectations.
- Rate hike odds for this month surged to 46% following the CPI data.
- Short-term Treasury yields jumped, with the 2-year Treasury note yield rising over 10 basis points to 4.89%.
Wall Street's main indexes opened lower on Wednesday after a hotter-than-expected September inflation report boosted bets for an interest rate hike this month. The S&P 500 sank 1.1% for a fifth loss in the six days since setting its all-time high. The Dow Jones Industrial Average fell 0.1%, and the Nasdaq composite slid 1.9%.
The core Consumer Price Index (CPI), which excludes volatile food and energy prices, rose 0.3% in September, exceeding the consensus estimate of 0.2%. This marks the second consecutive monthly increase of 0.3%, bringing the three-month annualized rate of change to 3.4%. The headline CPI rose 0.6%, as expected.
Investors parsed the inflation data, which sent Treasury yields higher. The 2-year Treasury note yield rose more than 10 basis points to 4.89%, closely linked to Federal Reserve policy expectations. Rate hike odds for the Federal Reserve's upcoming meeting surged to 46% from around 20% before the CPI release.
New York Fed President John Williams stated that one more rate hike is appropriate this year and he does not foresee the need for another in 2027, expecting inflation to cool next year. The Fed's Beige Book is also expected later in the day, which may offer insights into local business and consumer conditions.
Separately, the 10-year Treasury term premium reached its highest level in over a decade, potentially reflecting concerns about national debt, persistent inflation, and geopolitical uncertainty.