U.S.: Consumer Prices Continue to Moderate in September

Daily Forex Fundamentals | Written by TD Bank Financial Group | Oct 16 08 14:58 GMT |

* U.S. headline CPI was flat in September, bringing the annual rate of inflation to 4.9% Y/Y.
* Core CPI was also soft, rising by only 0.1% M/M with the core inflation rate remaining unchanged at 2.5% Y/Y.
* This better than expected inflation report will provide some breathing room for further monetary easing by the Fed.

U.S. consumer prices moderated further in September, with the headline inflation index remaining unchanged on the month (at three-decimal places the index declined by 0.031% M/M), bringing the annual rate of price inflation to 4.9% Y/Y (down from 5.4% Y/Y in July), which is the slowest pace of price increase since May this year. The pace of price increase was slower than the 5.1% Y/Y expected by the markets. Core consumer prices were also softer than expected, with core goods and services rising by only 0.1% M/M (lower than the +0.2% expected), with the annual core inflation remaining at 2.5% Y/Y for the third straight month.

The details of the report were equally soft. Not surprisingly, with energy prices continuing to ease at a dramatic pace, the price of fuel and utilities declined by 2.8% M/M, while the price for gas at the pump declined by a further 0.6% M/M, following the 4.2% M/M drop in August. On the other hand, owner’s equivalent rent accelerated during the month, rising by 0.2% M/M, while the cost of medical care (up 0.3% M/M) and education (up 0.1%) were also higher.


On balance, the report provided further confirmation of the easing in consumer price pressures in the U.S. and will undoubtedly provide some breathing room for further monetary easing by the Fed. We expect a 50bps cut in the Feds policy rate at its next meeting later this month. Looking ahead, with commodity prices declining by the day, and the growing economic slack tempering wage pressures and limiting the ability of businesses to pass on higher prices to their consumers, we expect consumer prices to continue moderating further in the coming months.

TD Bank Financial Group

The information contained in this report has been prepared for the information of our customers by TD Bank Financial Group. The information has been drawn from sources believed to be reliable, but the accuracy or completeness of the information is not guaranteed, nor in providing it does TD Bank Financial Group assume any responsibility or liability.