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US consumer prices rose faster than economists expected in September, with headline CPI up 3.7% year over year against a 3.6% forecast and a 3.4% prior reading, according to Coinpedia. Monthly headline CPI increased 0.6%, in line with expectations.
The core measure, which strips out food and energy, rose 2.6% annually — above the 2.5% consensus estimate and the 2.4% prior reading — while monthly core inflation reached 0.3% against expectations of 0.2%. CNBC reported that Treasury yields moved sharply higher after the release, with the 10-year note climbing more than 2 basis points to 5.242% and the rate-sensitive 2-year yield gaining more than 5 basis points to 4.852%.
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Key facts
- Headline CPI: 3.7% year over year in September, versus a 3.6% forecast and a 3.4% previous reading (Coinpedia).
- Core CPI: 2.6% annually, above the 2.5% estimate and the 2.4% prior figure, with monthly core at 0.3% versus 0.2% expected (Coinpedia).
- 10-year Treasury yield: up more than 2 basis points to 5.242%; the 30-year rose less than 1 basis point to 5.568% (CNBC).
- Fed odds: roughly 39% for a quarter-point hike at the October 28 meeting, up from 22.1% a day earlier, per CME FedWatch (CNBC).
- Data due Thursday: September producer price index, September retail sales and weekly initial jobless claims (CNBC).
Rates and the reaction in bond markets
Both readings came in above consensus, and the monthly core figure exceeded expectations by a tenth of a percentage point. The 2-year yield, which CNBC notes closely tracks expectations for Fed policy, touched its highest level since Sept. 29 during the session, while the 10-year benchmark hit its highest since Oct. 8 earlier in the day. The 30-year yield, which tends to react most to geopolitical events, moved least.
The report lands two weeks before the Fed’s next interest rate decision. The fed funds rate currently sits in a 3.75% to 4.00% range. Futures trading measured by CME’s FedWatch tool put the chance of a quarter-point increase on October 28 at about 39%, more than double the prior day’s reading. CNBC also reported a greater than 95% chance of at least one hike before year-end, including a 40% chance rates are higher by a half-percentage point — double the odds from a day earlier.
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Christopher Rupkey, chief economist at Fwdbonds, said in the CNBC report that with inflation still sticky the central bank may need to raise rates higher and hold them there longer in 2027. He described bond bulls as having turned and run the other way as 10-year yields shot higher, adding that the Warsh Fed’s approach to killing inflation is another dose of higher rates.
Why it matters
The surprise sits mostly in the core number, which is the reading the Fed watches most closely when setting policy. A monthly core print of 0.3% instead of 0.2% is the difference between gradual disinflation and a stall, and it reshapes how traders price the next several meetings. Two-year yields, the cleanest market signal for where policy is heading, moved the most — a sign that investors are repricing the path of rates rather than just the next decision. For households, the 10-year yield is the benchmark behind mortgages, auto loans and credit card debt, so the move feeds into borrowing costs beyond the bond market.
What to watch
Thursday brings the September producer price index, September retail sales and weekly initial jobless claims — the next data points that could confirm or complicate the inflation picture. The decisive date is October 28, when the Fed announces its rate decision.
This article is not financial advice, and markets are volatile and uncertain.
Sources: Coinpedia, Cnbc
