US September prices up 3.7%, reigniting interest rate concerns
US consumer prices rose 3.7% in September from a year earlier, exceeding the market forecast of 3.6%. Driven by a sharp increase in gasoline prices, concerns are growing that the Federal Reserve could raise interest rates again this month, drawing keen attention from markets.
The Consumer Price Index (CPI) for September, released by the Labor Department's Bureau of Labor Statistics (BLS) on Tuesday (local time), rose 0.6% from the previous month. That was a faster pace than August's 0.4%, and the annual increase also accelerated from 3.4% in August to 3.7%. The figure topped the consensus estimate of 3.6% compiled by Dow Jones and Reuters. Core CPI, which excludes food and energy, rose 0.3% month-on-month and 2.6% year-on-year, each exceeding forecasts of 0.2% and 2.5%. The annual core inflation rate was up 0.2 percentage point from August's 2.4%.
Energy led the September price increase. The energy price index climbed 5.2% from the previous month, and gasoline prices surged 9.1%, accounting for roughly half of the overall CPI gain. The war between the United States and Iran, which began in late February and has dragged on, has kept international oil prices elevated. Beyond energy, housing costs rose 0.4% month-on-month, and prices for used cars and trucks rose 0.7%. Food prices were flat compared with the previous month.
In a public opinion poll, about 78% of Americans said Trump administration policies, such as tariffs and the US-Israeli war against Iran, were the cause of rising prices. The midterm elections will be held on November 3.
After the CPI release, the yield on the benchmark 10-year US Treasury note rose to 5.306%. The two-year Treasury yield climbed 13.6 basis points to 4.929%, while the 30-year yield rose 4.9 basis points to 5.612%. The probability of a rate hike in October implied by the CME Group's FedWatch rose from about 22% before the CPI release to 43% afterward.
The Fed raised its benchmark rate by 25 basis points in September, lifting the target range for the federal funds rate to 3.75–4.00%. The next Federal Open Market Committee (FOMC) meeting will be held on October 27–28. Deutsche Bank analysts said, "A price reading that differs from expectations, in either direction, will shape market expectations ahead of the next Fed meeting." The personal consumption expenditures (PCE) price index, which the Fed closely watches in assessing its inflation target, rose 3.0% year-on-year in August on a core basis, higher than core CPI's 2.4% increase over the same period.
