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September consumer prices rose 2.4% Y/y, above the consensus estimate of 2.3% but slower than the prior 2.5%. The core metric came in faster than in September at 3.3% Y/y, price excluding volatile item have not seen this pace since May. Core services CPI, which stands as the largest weight in the BLS price basket, contributed to 2.8% of the increase in the headline, energy and goods prices dragged the metric lower with negative contributions of 0.2% and 0.5%, respectively. Our tracker of U.S. inflation surprises is rebounding in September as the headline CPI tops the consensus for the first time since April, however, the gauge had not been positive since May. Looking at a breakdown in contributions to the Cable FX Macro U.S. Inflation Surprise Index, core CPI leads the upside on the month (log in to access online tools>inf dashboard for more information on economic estimates and the inflation surprise index).
The median forecast for October CPI stands at 2.6% Y/y, if materialized this would point to a re-acceleration in consumer prices. However, a faster than expected print may be needed at this point to support further and sustainable dollar gains ahead. The Cable FX Macro Dollar Index is breaking prior highs to mark levels not seen since early May, our measure of the dollar is not trade weighted, but it focuses on G10 liquidity. Flagging downside risks to the consensus forecast, Société Générale and Bank of America headline CPI projections stand at 2.4% Y/y, this is almost two standard deviations away from the median survey.
Analysts at Rabobank point to Fed officials confidence on inflation coming back to target, policymakers have recently focused on measure that signal prices are moving in the right direction. Adding empirical evidence to this view, a proprietary tool built by Bloomberg, shows Fed official speakers sentiment turning dovish since the 50bps rate cut in September, the trend has not reversed despite recent stronger U.S. data. The desk at TD Securities said that October CPI print will be particularly interesting after the stronger-than-expected September figure, they added that further signals of price growth stickiness may keep officials away from delivering another 25bps rate cut in December. Looking ahead, TD has revised 2025 inflation forecasts higher as they factor in the Trump administration measures, they think tariff implementations and tax cuts will result in more persistent inflationary pressures.
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