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The latest inflation data is expected to show price increases are accelerating
Ahead of US CPI, economists polled by Dow Jones expect September CPI to rise 0.6% m/m and 3.6% y/y, with core CPI up 0.2% m/m and 2.5% y/y. Energy/oil prices are flagged as an upside risk to the headline and as potentially limiting how much the Fed can treat it as temporary.
Ahead of Wednesday’s US CPI release, economists expect September headline inflation to rise 0.6% month on month and 3.6% year on year, which would imply that the pace of price growth is accelerating away from the Federal Reserve’s 2% objective. Core CPI, which strips out food and energy, is forecast to increase 0.2% m/m and 2.5% over the year, a weaker month-to-month print than headline but still consistent with inflation remaining above target on a 12-month basis.
The piece highlights oil-related prices as a key upside risk to the headline number. One economist cited argues that when energy-driven inflation moves, forecasts often undershoot outcomes, meaning the September CPI could come in higher than models expect. Another argument in the article is that persistently high oil prices could flow into costs for non-energy items, reducing the scope for the Fed to dismiss the shock as purely temporary.
The article also notes that the Fed has recently signaled the potential for further tightening: after an initial hike last month, the minutes from that meeting suggested the central bank may need to lift rates again. Investors, it says, anticipate a possible move at the December meeting, while Wednesday’s CPI would be the final data point before November’s midterm elections.
For FX traders, the key watch is whether the CPI surprise is confined to energy or shows up in broader, more durable components that would shift expectations for the Fed’s next steps.
Why this matters for FX
US CPI expectations directly shape Fed rate-path pricing and US real-rate dynamics. If oil-related items lift headline inflation more than anticipated and spread into broader categories, markets may price a higher-for-longer stance (tightening financial conditions), supporting USD versus rates-sensitive peers; if the core picture stays contained, the implication for rate expectations may be more limited. The story also links sticky energy costs to the Fed’s ability to ‘look through’ temporary shocks.