US CPI preview: Bond market and analyst expectations, S&P 500 reaction and more

investing.com:

The Consumer Price Index (CPI) report for September 2023 is scheduled for release on Thursday, October 12, at 08:30 ET (12:30 GMT).

Since March 2023, there has been a general cooling of prices for both goods and services. While prices are still on the rise, the rate of increase has slowed considerably compared to the rapid inflation experienced in 2021 and 2022.

This slowdown is evident across the three main categories often used by the Federal Reserve for analysis: goods, services, and housing. These categories have seen slower price growth, with some even experiencing annual declines, especially in goods, including various food items and used cars.

Market Expectations

Core inflation, which excludes food and energy prices, has been gradually decreasing in 2023, and current predictions suggest that this trend of cooling core inflation will persist. The consensus is looking for a 0.3% increase in core inflation on a month-over-month basis, and 4.1% on a year-over-year basis.

Headline inflation is expected to increase 0.3% on an MoM basis and 3.6% on an annual basis. However, while the consensus forecast looks for a rounded print of 3.6%, the swap market implies a figure that rounds down to 3.5%.

Hence, a higher-than-expected figure may yield a stronger-than-expected move across markets.

For August, core CPI rose 0.3% and 4.3% on a MoM and YoY basis, respectively. The headline inflation jumped 0.6% and 3.7%, respectively.

Despite the overall trend of cooling prices, a recent surge in energy costs contributed to an uptick in the headline CPI in August. This trend may persist into the September report, as oil prices continued to rise during that month.

Analysts' Expectations

Here’s what three major banks expect from the