Heading into Wednesday morning’s September Consumer Price Index report, our suspicion based on previously received data was that the latest look at inflation ran the risk of coming in stronger than the market expected.
That’s exactly what we saw in both the headline and core CPI September figures with the former stepping up to 3.7% on a year-over-year basis versus 3.4% in August, while the core figure climbed to 2.6% from 2.4% in August. The sequential figures for both inflation metrics were also ahead of the market’s expectation.
The follow through as the market comes around to recognizing that inflation tailwinds are blowing harder than it thought is that equity futures have turned down, while Treasury yields have turned up, with the 10-year yield back over 5.3%. So far, we haven’t seen any real movement in the rate hike probabilities for October or December Fed policy meeting tracked by the CME FedWatch Tool, but it may take some time for that to flow through to the model. We’ll be sure to check back later on Wednesday morning and again in the afternoon.
Here’s the thing: If we follow the September PMI data from ISM and S&P Global…