In mid-September, the Federal Reserve raised interest rates for the first time in three years. In its policy statement, the central bank stated that "inflation remains elevated," and the rate hike "will support a timelier return to the Committee's 2 percent goal."
The decision followed the August Consumer Price Index (CPI) report, which showed headline inflation was "uncomfortably high," writes David Payne, staff economist and reporter for The Kiplinger Letter, in the Kiplinger inflation outlook. He explains that the pickup was driven by higher gas and fuel oil prices, shelter costs and airfares.
And with energy costs likely to stay elevated as the situation in the Middle East remains unresolved, Payne believes the annual CPI rate will end the year at 4%, while core CPI will be at 2.7%.
With another Fed meeting on the near-term horizon — the central bank will issue its next policy decision on Wednesday, October 28 — the release of the September CPI report is a key economic event we're tracking.
What is the CPI?
"CPI is a measure of the average price of that basket of goods and services over time," writes Kiplinger contributor Coryanne Hicks. "The specific goods and services within the CPI basket are based on information that around 24,000 families and individuals give the U.S. Bureau of Labor Statistics on what they buy."
The two primary measures of CPI are headline, which is the total inflation rate experienced by households, and core CPI, which excludes volatile food and energy prices.
Core CPI arrived in line with expectations in August, but ticked higher on a monthly basis — up 0.3% vs 0.2% in July. Costs for communication, travel, education, and used cars and trucks were all higher in August, while prices dropped for medical care and motor vehicle insurance.
When does the September CPI report come out?
The Bureau of Labor Statistics will release the September CPI report at 8:30 am Eastern Standard Time on Wednesday, October 14.
Headline CPI is expected to be up 0.6% from August to September and 3.6% from the year prior. Core CPI is forecast to rise 0.2% month over month and 2.5% year over year.
Ahead of the September CPI report, we looked at what economists, strategists and other experts on Wall Street expect the data to show. You'll find these outlooks, edited at times for brevity, below.
What Wall Street expects from the September CPI report
"This week's CPI report is likely to be the most important release of data the Fed will see before its October meeting. The most important angle to watch will be whether services inflation remains sticky. Prices for services excluding energy rose 3.0% over the 12 months ending in August, above a pace consistent with the Fed's 2% target. The push and pull of contributing components will also be important to monitor. A rising share of components running above target might signal that price pressures are broadening beyond energy." - Jason Pride, Chief of Investment Strategy & Research and Michael Reynolds, Vice President of Investment Strategy at Glenmede
"The September CPI could determine whether the Fed's next hike is imminent, or simply still ahead. We expect a strong 0.56% increase in headline CPI, lifting the 12-month rate to 3.63% from 3.40%, but a more moderate 0.19% rise in core CPI, which would edge the 12-month core rate down to 2.41% from 2.45%. An upside surprise, particularly in the core, could revive the October debate, both moving market pricing and influencing the decision itself. A print close to our forecast, however, we think would leave the Committee with room to wait. That would fit the broader data flow: softer-than-expected September employment, weaker auto and truck sales, and a downside surprise in core PCE inflation in August." - UBS Global Research economists
"Wednesday's CPI is likely to show elevated inflation thanks to rising energy prices, and while there will be much scrutiny on the month-over-month numbers, the bottom line is that inflation is still well above the Fed's 2% target and that is a problem for the central bank." - Clark Bellin, President and Chief Investment Officer, Bellwether Wealth
"Wednesday's CPI data is expected to show headline inflation accelerated towards 3.7% in September, reflecting the impact of higher energy prices, while core inflation is forecast at around 2.5%. The distinction between the two will be particularly important for the Federal Reserve, which raised interest rates in September but now faces the difficult task of containing inflation without placing unnecessary pressure on economic growth. Markets are currently pricing an approximately 80% probability that the Fed will leave rates unchanged at its October meeting. A softer core reading could reinforce that expectation and provide some relief to equities and bonds, while an upside surprise would risk another increase in yields and renewed pressure on risk assets." - Daniela Hathorn, senior market analyst at Capital.com
"The September CPI report is likely to tell a familiar story: headline inflation remains tied to developments in the Middle East, while underlying price pressures are tamer. We estimate the CPI rose 0.59% in September. Gasoline prices increased sharply during the month, while food inflation likely firmed as higher transportation costs get gradually passed through to consumers. Outside of food and energy, inflation appears to have moderated. We expect the core CPI to rise 0.20%, down from a stronger-than-expected 0.29% increase in August." - Wells Fargo economists