U.S. Consumer Price Index (September 2026)

Core inflation remains firm in September, strengthening the case for an additional near-term hike 

• The Consumer Price Index (CPI) rose 0.6% month-on-month (m/m) in September, matching the Bloomberg consensus forecast and accelerating from 0.4% in August. On a twelve-month basis, inflation rose to 3.7% from 3.4% in August – coming in slightly above expectations.
• Energy prices surged 5.2% m/m, led by a 9.1% increase in gasoline prices, which accounted for more than half of the monthly headline gain. Food prices were unchanged on the month and rose 2.5% year-on-year. Food at home fell 0.1% on the month, but food away from home rose 0.2%.  
• Excluding food and energy, core prices rose 0.3% m/m, matching August’s gain but coming in a tick hotter than expected. On a twelve-month basis, core inflation accelerated to 2.6% (also slightly above expectations) from 2.4% in August, while the three-month annualized rate rose to 3.4%.  
• Price growth for core services rose 0.4% m/m, a modest acceleration from 0.3% in the month prior. Within this category, shelter costs accelerated by a similar magnitude, rising 0.4% m/m from 0.3% previously. This reflected an acceleration in owners' equivalent rent (0.3% from 0.2%). Price growth in lodging away from home remained sturdy despite a deceleration to 2.0% from 2.4% previously. Non-housing services were up a similar 0.4% but this marked a slight cooling from the month prior.
• Gains in non-housing services were widespread, but not universal. Recording an acceleration were medical, transportation, recreational, and personal services. Airfare inflation remained sturdy but cooled a little (1.2% from 2.7%). Meanwhile, wireless phone services, which surged in the month prior, recorded a modest pullback.   
• Core goods inflation rose to 0.3% m/m from 0.1% in the month prior. Notable increases were recorded in used vehicle prices (+0.7%), recreation commodities (+0.9%), along with education and communication commodities (+0.9%). These increases were partly offset by ongoing declines in medical care commodities (-0.7%).    

Key Implications

• Headline inflation met expectations, accelerating in September as higher energy prices pushed the monthly gain to an outsized 0.6%. However, core inflation disappointed expectations for some cooling, holding at 0.3% m/m and accelerating on a twelve-month basis. Price pressures were relatively broad-based, with firmer readings across shelter, core goods and several non-housing services. Inflation in the latter has continued to run above 3% on an year-on-year basis for several months, highlighting its stickiness.  
• With core inflation running at 2.6% year-on-year and oil prices remaining elevated, which increases the risk that price pressures spread to other categories, the Fed likely will not be able to remain on the sidelines for much longer. Markets have responded, with market implied odds for an October hike increasing sharply following the release. We maintain the view that the Fed is due for another hike by the end of this year, even if the upside inflation surprise makes the timing more uncertain.

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