U.S. consumers absorbed slightly higher costs than expected in September, sparking hopes that inflation is indeed moderating.
The U.S. Department of Labor said Thursday that September’s consumer price index (CPI), which measures the change in prices on a variety of consumer goods and services, came in 0.4% higher month-over-month on a seasonally adjusted basis, and 3.7% year-over-year. But “core” CPI—which backs out food and energy costs, which are more volatile than the other costs tracked by the Labor Department—rose 0.3% MoM and 4.1% YoY.
A quick look at the numbers compared to expectations from economists surveyed by Dow Jones:
- MoM CPI: +0.4% (vs. +0.3% est.)
- YoY CPI: +3.7% (vs. +3.6% est.)
- MoM Core CPI: +0.3% (vs. +0.3% est.)
- YoY Core CPI: +4.1% (vs. +4.1% est.)
Here’s what several experts have to say about September’s CPI numbers and what they mean for consumers, the Federal Reserve’s future actions, and more:
“September’s consumer price index data offers a nuanced perspective on the U.S. economy. Yes, the persistent rise in the shelter index is a point of concern, spotlighting higher housing costs for many Americans. However, beneath the numbers lies a slightly more encouraging narrative. The anticipated spikes in energy, notably gasoline, did materialize, but the broader landscape exhibits potential disinflationary signals. The decline in indexes like used cars and trucks hints at a possible easing in certain demand sectors or supply chain recalibrations. More heartening is the three-month trend in underlying data, which paints a picture of stabilization and even optimism. It’s evident that while certain pressures persist, there are genuine indicators of an economy finding its equilibrium.”
—Jon Maier, Chief Investment Officer at Global X
“While the slight pickup in services inflation is concerning, this is just one data print and does not indicate the beginning of a new tendency. But, it highlights the need for the Fed to keep rates higher for longer to meaningfully reduce inflation. Overall, this print does not derail our expectation that the Fed will keep rates steady in November’s FOMC meeting. The key components of inflation—core goods and core services ex-shelter are weakening like they have been. Core services increased +0.57% MoM; taking out shelter prices, services increased +0.46%. ‘Supercore’ inflation, which is core CPI excluding shelter (+0.07% MoM) and a metric the Fed watches closely, remains lower than the levels we saw earlier this year. The current trajectory of inflation shows a better inflationary environment than last year but still has room to improve, supporting the case for higher interest rates for longer.”
—Gargi Chaudhuri, Head of iShares Investment Strategy, Americas
“Today’s CPI print of 0.4% month-over-month and 3.7% year-over-year was 0.1% above consensus largely driven by volatile components as well as an uptick in housing-related components following a sharper-than-expected decline in August. There will need to be much higher month-over-month readings for the remainder of the year in order to achieve the Fed’s 3.7% year-end expectation for Core PCE (above consensus and the Fed staff projection of 3.5%). Therefore, it is likely inflation will surprise the Fed to the downside in 2023, boosting the Fed’s confidence that monetary policy has been sufficiently restrictive.
“In conclusion, today’s data supports being close to the end of the hiking cycle as the U.S. economy remains on a disinflation path, which has been supported by recent Fed speak and the recent tightening in financial conditions. We view yields as attractive in the front-end of the U.S. Treasury curve and continue to find value in high-quality corporate and securitized bonds with short to intermediate durations.”
—Lindsay Rosner, head of Multi-Sector Fixed Income Investing, Goldman Sachs Asset Management
“Headline inflation was a little hot because of energy, but core prices remained subdued. This number isn’t great for the bulls but also doesn’t give much reason to be bearish. The latest surge in yields has gotten rates to a place where the Fed feels much less need to act. Inflation and the Fed will be less of a news driver in coming months as all the tightening gradually takes effect.”
—David Russell, Global Head of Market Strategy, TradeStation