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U.S. consumer inflation again turned out stronger than expected in September, dashing hopes for a slowdown that might persuade the Federal Reserve to stop raising interest rates.
The consumer price index rose 0.4% from August, and was up 8.2% on the year, according to the Bureau of Economic Analysis. While the headline rate was down fractionally from 8.3% in August, it’s still far above the Fed’s 2% target.
Stripping out volatile food and energy components, core prices rose by 0.6% for a second straight month, indicating broad and sustained inflationary pressure across the economy. In annual terms, the core CPIaccelerated to a new 40-year high of 6.6% from 6.3% a month earlier.
U.S. financial markets reacted negatively to the news, pricing in yet more aggressive interest rate action from the Fed at its next meeting at the start of November. The yield on the benchmark 2-YearTreasury note, which is highly sensitive to expectations of Fed action, rose another 15 basis points to 4.44%, while the 10-Year note yield, a reflection of longer-term inflation, touched 4% briefly before declining to 3.99%, still an increase of 9 basis points on the day.
The dollar likewise gained over half a percent on the news as the prospect of higher interest rates made it more attractive on a relative basis.
Stock futures went in the other direction, with the Nasdaq 100 Futures contract losing 2.8%, while S&P 500 Futures fell 2.1% and Dow Jones Futures fell 1.7%.
