Summary: September CPI increase in line with expected figure; headline and core figures rise by same amounts; rents, most index components “soft”, “sharp lift” in used vehicle prices.
The annual rate of US inflation as measured by changes in the consumer price index (CPI) halved from nearly 3% in the period from July 2018 to February 2019. It then fluctuated in a range from 1.5% to 2.0% through 2019 before rising above 2.0% in the final months of that year. “Headline” inflation is known to be volatile and so references are often made to “core” inflation for analytical purposes. Substantially lower rates for both measures were reported from March to May but recent reports indicate consumer inflation has largely returned to pre-pandemic levels.
The latest CPI figures released by the Bureau of Labor Statistics indicated seasonally-adjusted consumer prices increased by 0.2% on average in September. The rise was in line with the expected figure but less than August’s 0.4% increase. On a 12-month basis, the inflation rate ticked up from August’s rate of 1.3% to 1.4%.
Core inflation, a measure of inflation which strips out the volatile food and energy components of the index, also increased on a seasonally-adjusted basis by 0.2% for the month. The increase was in line with the 0.2% rise which had been expected but lower than August’s comparable figure of 0.4%. The seasonally adjusted annual rate remained unchanged at 1.7%.
“Rents are falling and most index components were soft, the exception being a sharp lift in used car prices,” said ANZ senior economist Catherine Birch.
US Treasury bond yields fell by increasing amounts across the curve. By the end of the day, the US 2-year yield had slipped 1bp to 0.14%, the 10-year yield had shed 5bps to 0.73% while the 30-year yield finished 6bps lower at 1.51%.
In terms of US Fed policy, expectations of any change in the federal funds range over the next 12 months remained fairly soft. November futures contracts implied an effective federal funds rate of 0.085%, just under the spot rate of 0.09%.