US Inflation Surges 8.2% as Probability for 75bps Hikes in December Increases

The U.S. consumer price index (CPI) rose more than expected in September as rents surged by the most since 1990 and the cost of food also increased. 

Inflation data for September came in at 8.2% YoY, a slight decrease compared from a reading of 8.3% in August, but still higher than 8.1% expected by economists. Meanwhile, core CPI also increased to 6.6% YoY from 6.3% and a consensus forecast of 6.5%.

According to the data released on Thursday, a 4.9% decrease in gasoline prices was overshadowed by food prices that increased 0.8%, while owners’ equivalent rent also jumped 0.8%, which was the largest increase since 1990.

With strong job reports in September and the unemployment rate that fell to 3.5%, the market is now fully priced in the probability of a 75 basis point increase in policy rate at the Fed’s meeting in November, which would be its fourth straight hikes at this pace. The probability for the fifth hike at the same rate also increased to 62% after the release of inflation data.