US September CPI Beats on Core, Pushing Annual Inflation to 3.7% and Raising Odds of October Fed Hike

The September consumer price index came in hotter than expected on both headline and core measures, intensifying pressure on the Federal Reserve ahead of its October policy meeting. Headline CPI rose 3.7% year over year, above the 3.6% forecast and a sharp jump from August's 3.4% reading. On a monthly basis, prices climbed 0.6%, matching expectations but accelerating from the prior month's 0.4%.

Core CPI, which strips out food and energy, was the bigger surprise. It rose 0.3% month over month versus the 0.2% forecast, and 2.6% year over year against a 2.5% consensus estimate, marking a step up from August's 2.4% annual reading. The core acceleration is particularly significant because it suggests inflation is broadening beyond energy costs, which had already been expected to lift the headline figure.

The report is the last major data release before the Fed's October meeting, and markets had already priced in better than 50% odds of a rate hike at that gathering. The hotter-than-expected core print removes a key argument for a pause, with commentary from Fed Governor Christopher Waller in the days before the report signaling a hawkish pivot. FXStreet flagged the data as a potential catalyst for pulling the next hike forward. Canadian building permits for August surged 8.8% month over month, well above the 3% forecast, though that read was overshadowed by the US inflation data.