Consumer prices in the U.S. were up 0.4% MoM in September 2022, and twice the market expectation of 0.2%. The annual inflation rate slowed for a third consecutive month, running to 8.2%, which is the lowest reading in seven months. The annual CPI declined fractionally from 8.3% in August but turned out stronger than expected again topping market forecasts of 8.1% and is well above the Fed’s target rate of 2%.

The monthly core CPI which strips out the volatile food and energy components, rose by 0.6% for a second straight month, indicating that the broad and sustained inflationary pressures in the economy persist. The annual core CPI reached a new 40-year high, rising to 6.6%, from 6.3% in August, coming above market expectations of 6.5%. Given the volatility of food and energy prices the Federal Reserve views the core inflation as a better indicator of future price trends. A rapidly rising core rate is a sign of persistent price pressures that can only be stamped out by higher interest rates. The hotter-than-expected U.S. inflation readings for September, reinforced the likelihood the Fed would extend its aggressive tightening. After the CPI data release the market is now pricing in a 98% chance that the Fed would hike rates by another 75 basis points in November, which would be the fourth such a hike in a row.