PremiumCPI Preview: Hot Headline, Tame Core, And An October Hike Nobody Wants
A month ago the Fed's next move hinged on the second decimal of core CPI. This time the bar is far lower, or at least the Fed is pretending it is.
Recall that in September the FOMC hiked rates for the first time since July 2023, just days after an August CPI report that showed the lowest core inflation since 2021 (which however sent rate-hike odds soaring as it came in just fractionally above the median estimate). Last week's FOMC minutes showed all 19 officials backed that hike and that "most" see another one by year-end as appropriate. But then the September payrolls report came in at a dismal 29K, wage growth slowed to 3.0% (the weakest since May 2021), and the Fed's heavy hitters suddenly discovered the virtue of patience: Jefferson and Williams say there is time to assess the data, Waller wants more hikes but not at consecutive meetings, and Bowman sees no urgency at all. Williams added on Tuesday that one more hike this year is "likely" appropriate, with nothing further in 2027.