U.S. Inflation Report for September

The U.S. inflation report for September sparked mixed reactions on Wall Street as analysts weighed in on its implications for the Federal Reserve's next move.

The Consumer Price Index (CPI) came in at 2.4% in September, slightly above expectations of 2.3% but down from 2.5% in August. Month-on-month, the index climbed 0.2%, just above expectations of 0.1%.

The latest reading raises questions about the Federal Reserve’s next move.

Analysts' Reactions

Evercore ISI reported that September’s CPI print was "slightly firmer than expected" but "compositionally mixed." They noted continued acceleration in core services excluding housing but a cooling in housing services inflation, especially rents. Evercore ISI emphasized that while inflation hasn’t been fully tamed, the data might not jeopardize anticipated rate cuts in November and December. They expect a baseline of a 25 basis point cut per meeting through Q1 2025.

Morgan Stanley echoed stability, calling the CPI report a “mild acceleration.” They highlighted a significant decrease in shelter costs, particularly owners’ equivalent rent (OER). Despite a slight uptick in core goods prices, analysts maintained their forecast for a 25 basis point cut in November, stating, “Nothing in the report changes our call.”

William Blair took a more cautious tone, noting that September showed "slightly less progress on inflation than hoped for." They acknowledged that while inflation decelerates, external factors, like rising oil prices and seasonal adjustments, could introduce volatility in the upcoming months.

UBS warned of potential volatility ahead, projecting core CPI inflation to fluctuate between 3.3% and 3.4% soon. They forecast moderate strengthening in October’s CPI but believe inflation will ease after December.

Bank of America described the report as showing "some stickiness on inflation" but remained optimistic about a potential 25 basis point cut in November, citing a deceleration in rent prices. They stated, “We are not yet worried about reacceleration risks.”