September Inflation - Above Forecast

Consumer prices (CPI) increased 0.4% month-over-month, higher than forecast (0.3%), but moderating from 0.6% rolling six month average.  In September, the consumer price index (CPI) increased 0.4% compared to August.  Expectations ranged from 0.1% to 0.4% with a median of 0.3%.  Of note, the rise in prices reflected higher food and shelter costs, while used cars and trucks, apparel and airfares all cooled.  Core CPI (all items less food and energy) rose 0.2% in September.

Consumer prices (CPI) increased 5.4% year-over-year, higher than forecast (5.3%), and tying June and July for the highest levels seen since 2008.  In September, the consumer price index (CPI) increased 5.4% compared to the same period a year ago.  Expectations ranged from 5.0% to 5.5% with a median of 5.3%.  Core CPI (excludes food and energy) increased at 4.0% year-over-year, unchanged from August.

We continue to believe that outsized levels of inflation will prove transitory (i.e. normalization in 2022 and 2023) but the combination of supply chain disruptions and higher input costs (commodities and wages) are driving more persistent inflation than was originally anticipated by economists and policymakers.  This outcome reinforces the Fed’s inclination to begin tapering in the fourth quarter.  Minutes from last months FOMC meeting, out this afternoon, may provide further insights on the Feds evaluation and outlook for employment and inflation.