Consumer Prices (CPI) for September were +0.4% month-over-month, higher than the survey estimate of +0.3% but lower than the prior month’s +0.6%. Core CPI (excludes food and energy) was reported +0.3%, in-line with estimates and matching the August result. Year-over-year CPI for September was +3.7%, matching August but higher than the +3.6% estimate. And Core Y/Y CPI for September was 4.1%, matching the estimate and lower than August’s +4.3%.
So, on balance, with M/M and Core Y/Y lower than that reported for August and the Core M/M and Y/Y matching August, one could argue there’s a case supporting the FOMC’s ‘soft landing’ thesis. But the market is reading today’s CPI results as having plateaued over the last three months, and possibly steering the Fed to additional rate hikes.
U.S. Treasury yields surged following release of the inflation data, inverse to Treasury prices which are now lower in all 17 tenors. The biggest price drops are on the near end of the yield curve with the 2-year -0.08%. Fed Funds Futures are implying a 29% probability of a 25-basis-point at the December 13th policy decision.
Higher Treasury yields have fueled flows into the USD, lifting the dollar to gains against all G10 currencies: +0.83% vs. NZD, +0.61% vs. AUD, +0.49% vs. GBP, +0.46% vs. EUR, +0.40% vs. NOK, and lesser gains vs. SEK, JPY, CHF, CAD, and MXN.
Equities are mixed today, and on the commodities front, oil is +1.72% and gold is trading at 1,878.21/oz.