U.S. CPI Rises to 3.7% in September, Above Forecasts, as Gasoline Surge Lifts Fed Hike Odds

US consumer prices rose 0.6% in September on a seasonally adjusted basis and 3.7% from a year earlier, up from 3.4% in August, the Bureau of Labor Statistics said on October 14. Economists had expected 0.6% for the month and 3.6% for the year. Core CPI, which excludes food and energy, rose 0.3% for the month against a 0.2% forecast and 2.6% over the year, up from 2.4% in August and above the 2.5% consensus.

Energy drove the headline. Gasoline rose 9.1% in September and accounted for over half of the monthly all-items increase, and the energy index rose 5.2% on the month and 20.4% over the year. Gasoline is up 34.2% from a year earlier and fuel oil 74.2%, per BLS. Outside energy, increases were far smaller: food rose 2.5% and shelter 3.2% over the year, although airline fares were up 22.4%.

The 3.7% reading is the highest since May, when annual inflation peaked near 4.2%. By the count circulated by market commentators, CPI inflation has now held above 2% for 66 consecutive monthly readings, although the Fed's 2% goal is formally defined on the PCE price index rather than CPI.

Markets moved toward another rate increase. CME FedWatch odds of a hike at the October 27-28 meeting rose to roughly 44% to 49% from about 22% before the report, per Decrypt and CoinDesk; the Fed already raised its target range to 3.75%-4.00% in September. The 2-year Treasury yield rose 13 basis points to 4.92% and the 10-year 9 basis points to 5.31% by 8:35 a.m. ET, and Bitcoin fell about 1.5% to $82,142. Next to watch: the producer price data and any Fed commentary before the October meeting.