US producer prices increased by the most in 4-1/2 years in September amid rising costs for goods and services, the latest indication of inflation broadening out beyond energy products.
Summary Following today’s PPI release, we are updating our nowcast by +2bps to +34bps m/m and by −1bp to 3.09% for the y/y September core PCE reading (a correction to the 3.12% y/y figure in our earlier email). We maintain our base
The Fed’s odds of threading the needle and getting inflation back down to target while avoiding a recession get much lower; & Fed Chair Warsh’s oaths of fealty to Trump are not helpful at all...
The report shifts the RBA debate from when the next hike comes to whether it comes at all, with a pause now looking the likelier near-term outcome. That leaves the Australian dollar out of step with the wider market. While gold and major currencies have risen against the US dollar on lower Treasury yields, the Aussie has stayed near its post-data lows, as a narrowing rate outlook at home offsets the broader dollar weakness. Further AUD underperformance is likely on crosses such as AUD/NZD and AUD/JPY if markets keep paring RBA hike bets. The noisy nature of the data means the next release, and the RBA’s revised forecasts in November, will carry extra weight. -- Australia’s jobs market blinked in September, and with it went most of the market’s appetite for a November RBA hike. Summary: Employment fell 39,300 in September against expectations of a 20,000 rise. August was revised down to 2
Citi’s shift removes one of the last prominent holdouts against a December hike, so the debate moves from whether the Fed tightens again to when. The swing in October pricing, which spiked after the data and then faded, shows traders are uncertain about the timing and are likely to react strongly to any Fed speaker who leans either way before the meeting. A higher-for-longer path, with cuts pushed out to mid-2027, tends to support the US dollar and Treasury yields and to weigh on rate-sensitive assets. The core detail matters most: inflation spreading beyond gasoline is harder for the Fed to look through than an energy spike alone. -- The hot CPI print was enough to turn Citi from a Fed sceptic into a December hiker, and markets are now asking whether October comes first. Summary: Citi now expects a 25bp Fed rate hike in December, after previously forecasting no further moves this year T
