US September CPI is Coming Today: What Investors Will Be Watching in the Report?

Moomoo News Global joined discussion · Oct 13, 2022 14:57

The consumer price index is due out at 8:30 AM Eastern Time on Thursday, and it will be closely watched by investors as a key input ahead of the Fed's next meeting on Nov. 1 and 2.

Inflation Remains Too High

Economists expect September CPI reading to rise 8.1% from a year earlier, easing from the 8.3% pace in August. The annual rate of core inflation at 6.5% is expected to top 6.3% in August, matching the rate seen in March that was the highest since 1982.

US September CPI is Coming Today: What Investors Will Be Watching in the Report?

Soaring Rents

Over the past two years, the run-up in rents and housing prices has slowly fed into CPI figures, fueling massive jumps in the indexes for rent of primary residence and owners' equivalent rent. Both rose 0.7% in August. Deutsche Bank AG economists expect rent inflation to remain high in September and both metrics to rise by yet another 0.7% in Thursday's report.

What Do Economists Think?

"The bulls are desperate for signs that inflation is set to roll back to the Fed's target — they may be mistaken, and while headline inflation is expected to fall thanks to a decline in energy, the Fed's focus has shifted towards core CPI," said Chris Weston, head of research of Pepperstone, in a Tuesday note.

Societe Generale SA Chief US Economist Stephen Gallagher sees a relatively rapid deceleration in core CPI toward 4% over the coming year, but said it gets "incredibly challenging" to continue to see inflation drop when rents are still growing at a rapid pace. He noted that a softer labor market is needed to slow rent inflation to a degree that is consistent with the Fed reaching its ultimate inflation goals.

"If CPI comes in strong, the markets will sell off. Equities won't like it," said Michael Gapen, chief U.S. economist at Bank of America. "If it comes in a little lower, the Fed will say the labor market is still strong, they're going to hike 75 basis points." Unless the report is a major miss to the downside, the markets will expect a three-quarter point rate hike, he said.

"The rise in producer prices in September suggests that Thursday's Consumer Price Index will likely also remain elevated, as the prices consumers pay for goods in the future are derived from the prices that producers pay today," wrote Ryan Belanger, founder and managing principal of the wealth management firm Claro Advisors.

Source: Labor Department, Bloomberg, Dow Jones, CNBC

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