US Inflation Surges to 3.7%, Highest Since May, Fueling Rate Hike Odds
Translated & summarized from 0404 by baba
U.S. annual inflation accelerated to 3.7% in September, the highest since May, driven by a 9.1% surge in gasoline prices. Core inflation also rose, indicating broader price pressures beyond energy. The data significantly increased market expectations for a Federal Reserve interest rate hike by December, despite signs of labor market slowdown. The inflation figures also affected Israeli markets, with bond yields rising.
The story in 6 lines · by baba
- U.S. annual inflation hit 3.7% in September, the highest since May, exceeding expectations.
- Gasoline prices surged 9.1% in September, contributing significantly to the overall inflation increase.
- Core inflation also rose, indicating price pressures are expanding beyond energy costs.
- Market expectations for a Federal Reserve rate hike by December jumped to around 50% after the data release.
- The U.S. labor market showed signs of slowing, with rising unemployment and fewer jobs added in September.
- The inflation data impacted Israeli markets, causing indices to narrow gains and bond yields to rise.
Consumer prices in the United States rose significantly in September, with the annual inflation rate accelerating to 3.7%, the highest level since May, according to data released Wednesday by the U.S. Bureau of Labor Statistics. This figure exceeded economists' expectations of 3.6% and was up from 3.4% in August. The monthly increase in the Consumer Price Index (CPI) was 0.6%, the sharpest rise in five months.
The core inflation rate, excluding volatile food and energy prices, also showed an uptick. It rose 0.3% for the month, matching August's pace but surpassing the forecast of 0.2%. The annual core inflation rate increased from 2.4% to 2.6%, above the projected 2.5%, indicating that price increases are no longer solely driven by energy costs.
Gasoline prices were a major contributor, surging 9.1% in September and accounting for over half of the monthly CPI increase. The overall energy index climbed 5.2% for the month, with year-over-year energy prices up 20.4% and gasoline prices up 34.2%. These increases are attributed to the conflict involving Iran and disruptions to oil supplies through the Strait of Hormuz.
Housing costs, a significant component of the CPI, rose 0.4% in September, up from 0.3% the previous month, with the annual rate at 3.2%. Other price hikes included a 1.2% increase in airfares and a 0.7% rise in used car prices. Conversely, supermarket food prices saw a slight decrease of 0.1% for the month, though annual food inflation remains at 2.5%.
In response to the inflation data, the U.S. Social Security Administration announced that retirement benefits will increase by 3.6% next year, aligned with the July-September price increases. The Federal Reserve had previously raised interest rates by a quarter percentage point in September to a range of 3.75%-4%. Before the CPI release, market expectations for another rate hike at the upcoming October 27-28 meeting were around 20%. Following the data, these expectations jumped to approximately 50%, with many economists anticipating a further increase by December.
The economic picture is mixed, as the U.S. labor market shows signs of slowing, with only about 29,000 jobs added in September and the unemployment rate rising to 4.2%. However, consumer inflation expectations for the coming year have climbed to 4.6%, a concern for the central bank. The data also impacted markets in Tel Aviv, where leading indices narrowed their earlier gains after the release, renewable energy stocks weakened, and the yield on ten-year Israeli government bonds rose to 4.157%.
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