OMM Newsroom
US inflation accelerated more than expected in September, bolstering expectations that the Federal Reserve will leave interest rates unchanged this month before considering a 25-basis-point increase in December.
Monthly inflation rose 0.6%, while the annual rate reached a four-month high of 3.7%, according to Labor Department data reported by Anadolu Agency.
Core inflation, which excludes food and energy prices, also came in above expectations, rising 0.3% month on month and 2.6% year on year.
The Federal Reserve’s Beige Book, released on Wednesday, said price pressures persisted and intensified in some regions.
After the data was released, the yield on the US 10-year Treasury rose 11 basis points to 5.33%, while the 30-year yield reached 5.63%. The US dollar gained 0.7% to 102.94, its highest level of the year, amid expectations of tighter monetary policy.
Analysts said the Fed could keep policy tight for longer to ensure price stability before raising rates again this year. However, they said it remained uncertain whether the next increase would come in December.
A weaker-than-expected jobs report, showing 29,000 new nonfarm payrolls and an unemployment rate of 4.2%, had fuelled expectations of a pause in rate increases. But the hotter consumer price index data prompted “CME Group” futures to indicate a 67% probability that the Fed would hold rates this month, against a 33% chance of an immediate increase.
Nonfarm payroll figures for July and August were revised down by 60,000. Market pricing suggests the Fed could raise rates by 25 basis points at its final meeting of the year in December.
Padhraic Garvey, “ING”’s head of regional research for the Americas, told Anadolu that rising housing costs confirmed the upward risks to core inflation. He said the overall economic outlook was not strong enough to prompt a rate increase in October, but expected a hike by December at the latest.
Garvey said a sharp rise in gas prices had driven headline inflation, while food prices were unchanged and price movements in health care, education and communications were more limited.
Steven Kamin, a senior fellow at the American Enterprise Institute, said consecutive monthly increases in core inflation showed that rising energy costs had spilled over into other sectors. He added that geopolitical tensions could delay the effects of the disinflationary process.
Kamin said inflation was likely to ease once energy prices fell. He added that recent data may have revived the possibility of an October rate increase, which Fed officials had previously ruled out.
