The U.S. Consumer Price Index (CPI) data for September, released on Thursday, exceeded expectations across the board, indicating a pause in the recent process of easing price pressures. The data showed that the overall U.S. CPI in September rose by 2.4% year-on-year, marking the sixth consecutive month of decline, slightly higher than the market-anticipated 2.3%, but still the lowest year-on-year increase since early 2021, lower than the previous value of 2.5%; the overall U.S. CPI increased by 0.2% month-on-month in September, slightly higher than the market-anticipated 0.1%, and in line with the previous value. The core CPI, which is considered to better reflect underlying inflation, also exceeded market expectations. The U.S. core CPI rose by 3.3% year-on-year in September, the highest since June, higher than the market-anticipated 3.2%, and in line with the previous value; it increased by 0.3% month-on-month, also higher than the market-anticipated 0.2%, and in line with the previous value.

Analyst Enda Curran pointed out that it was expected that housing would exert upward pressure on inflation, but the food sector also seemed to play a role. The data showed that the housing index rose by 0.2% in September, and the food index rose by 0.4% — these two indices together contributed more than 75% of the growth in all items.

It is reported that the prices of new and used cars, clothing, and furniture rose, marking the second increase in so-called core goods prices since June 2023. In the service sector, there was a significant increase in the prices of auto insurance, healthcare, and air tickets. According to media calculations, service prices excluding housing and energy items rose by 0.4% month-on-month, the largest increase since April, and the third consecutive month of accelerated growth.

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After the release of the U.S. September CPI data, as of the time of writing, the yield on ten-year U.S. Treasury bonds rose slightly to 4.083%, and the yield on two-year U.S. Treasury bonds rose to 4.045%; the declines in the three major U.S. stock index futures widened, with Dow futures down 0.22%, S&P 500 index futures down 0.35%, and Nasdaq futures down 0.51%.

It is worth mentioning that tonight's CPI data is the most significant inflation data before the Federal Reserve's November meeting and the last CPI report before the 2024 U.S. presidential election. The higher-than-expected inflation data, coupled with the U.S. September non-farm employment data released last week, which far exceeded expectations, may intensify the market's debate on whether the Federal Reserve will cut rates by 25 basis points in November or pause rate hikes.

In the meantime, after the release of the U.S. September CPI data, traders increased their bets on a 25 basis point rate cut by the Federal Reserve next month. Swap contracts show that traders now estimate the likelihood of a 25 basis point rate cut by the Federal Reserve in November to be higher than 80%. Greg Peters, Co-Chief Investment Officer at PGIM Fixed Income, said, "What really matters is the labor market." Andrew Brenner, Head of International Fixed Income at NatAlliance Securities, also said, "The Federal Reserve is much more concerned about employment."

Some traders believe that the likelihood of a 25 basis point rate cut by the Federal Reserve next month is higher because, although the U.S. September CPI data exceeded expectations, it is still largely on a downward trend, and the Federal Reserve's preferred PCE indicator has been converging towards the 2% target. The Personal Consumption Expenditure (PCE) to be released later this month is expected not to be affected by several strong growth items in the September CPI, such as auto insurance and air ticket prices.

Pepperstone analyst Michael Brown said that despite the U.S. inflation data being higher than expected, the September CPI data seems unlikely to substantially change the FOMC's policy outlook. He pointed out, "Despite the September employment report being stronger than expected, given the continued progress of disinflation, it is expected that there will be a rate cut of 25 basis points at each of the remaining two policy meetings this year. This pace of rate cuts may continue until 2025, until the federal funds rate roughly returns to a neutral level of around 3% next summer."

Harris Financial Group analyst Jamie Cox said that the process of inflation falling is still ongoing, but anyone who thinks the Federal Reserve will cut rates by another 50 basis points in November is very wrong. He pointed out that when interest rates are not high enough to reduce economic growth, they are also not high enough to completely suppress inflation. Although the Federal Reserve will lower interest rates, it will do so at a measured pace from now on.