US CPI came in hotter than expected in September

September’s US CPI report reflected the easing of price pressures for the month, but annual core and headline inflation readings were still hotter than expected.

Headline CPI rose another 0.2% month-on-month, slightly higher than the 0.1% rise expected, while core CPI posted a 0.3% monthly gain versus the 0.2 expected rise %. This took the annual CPI down from 2.5% to 2.4%, a step higher than the consensus of 2.3% and still above the central bank’s 2% target.

Link to Official US CPI Report (September 2024)

Underlying components showed gains were boosted by a 0.2% monthly rise in shelter costs and a 0.4% rise in food prices, while the energy index fell 1.9% for the month .

The CME FedWatch tool showed an 84.4% chance of a 0.25% rate cut at the next Fed meeting, up from an 80.3% chance the previous day, as traders see less chance of another 0.50% reduction in loan costs.

Market reactions

US Dollar vs. Major Currencies: 5 min

USD chart overlay against major currencies by TradingView

The US dollar, which started to add further volatility in the hours leading up to the US CPI release, bounced back and forth after seeing the actual numbers.

Although the results came in the green, the US currency continued to fall against the yen and the franc, while it also fell briefly against the rest of its peers except for the Canadian dollar.

From there, the dollar rallied against higher-yielding peers for about an hour after the CPI numbers were printed, then continued to decline again towards the end of the trading session.