The cost of living continued to climb in September, with consumer prices rising 0.6% for the month and 3.7% on an annual basis, according to the Bureau of Labor Statistics. This exceeded economists' expectations of a 0.6% monthly increase and a 3.6% annual rate. Excluding volatile food and energy costs, the core consumer price index (CPI) rose 0.3% for the month and 2.6% annually, also surpassing forecasts of 0.2% and 2.5%, respectively.
The surge in energy costs remained a major driver of inflation, with the energy index jumping 5.2%. Gasoline prices soared 9.1%, contributing significantly to the overall CPI increase. Over the past year, gas prices have risen 34.2%, while fuel oil prices have surged 74.2%. Food prices remained flat for the month but were up 2.5% annually. Other notable increases included shelter prices (0.4%), used car and truck prices (0.7%), and apparel prices (0.3%).
The inflation data led to a negative turn in stock market futures and a sharp rise in bond yields. Futures traders increased the odds of a Federal Reserve rate hike at the upcoming Federal Open Market Committee meeting to about 54%, with better than 96% odds of a rate rise by the end of the year. Analysts noted that core inflation ran at a 3.7% annualized pace in September, highlighting persistent inflationary pressures.
Sonu Varghese, chief macro strategist at Carson Group, commented that investors continue to be surprised by broad-based inflation, despite the temporary nature of energy-driven price surges. The Federal Reserve had raised interest rates in September for the first time in over three years, and markets expect another hike in December. Policymakers are concerned that prolonged geopolitical tensions could embed inflation in consumer and business expectations.