The US dollar climbed as much as 0.5% to 102.66 on Wednesday, reaching its highest level since April 2025 after fresh inflation figures strengthened expectations of further Federal Reserve tightening. Consumer prices increased 0.6% in September from the previous month, the fastest rise in five months, while annual inflation reached 3.7%. Although the headline figures were broadly in line with forecasts, underlying inflation proved more persistent than expected. Core CPI, which excludes food and energy, rose 0.3% monthly and 2.6% annually, reinforcing concerns that elevated energy costs are keeping price pressures high. At the same time, Brent crude continued to rise on escalating Middle East tensions and their potential impact on supply. However, Fed Vice Chair for Supervision Michelle Bowman said she saw no immediate need for another increase following last month’s hike, despite inflation remaining above target.
Consumer prices rose from 3.4% to 3.7% year-ove-year in September, above the 3.6% economists expected, according to the Bureau of Labor Statistics report released Wednesday. On a monthly basis, the Consumer Price Index increased 0.6%, matching expectations and accelerating from August’s 0.4% pace. Core inflation, which strips out volatile food and energy prices and is the gauge the Fed watches most closely, rose 0.3% month over month against a 0.2% forecast. The annual core rate came in at 2.6%, versus 2.5% expected and above August’s 2.4%. Both measures of annual inflation still remain above the Federal Reserve’s 2% target. Before the report, traders priced a 22% chance of a second consecutive hike in October, according to the CME FedWatch tool. What Drove The Increase Gasoline did most of the work. The gasoline index jumped 9.1% in September, accounting for more than half of the monthly increase, the BLS said. The broader energy index rose 5.2%. Over the past 12 months, energy prices are up 20.4% and gasoline is up 34.2%. Food prices were unchanged on the month. Food eaten at home fell 0.1%. Outside of energy, price pressures kept building. Shelter, the largest component of the index, rose 0.4% after a 0.3% gain in August. Owners’ equivalent rent, which estimates what homeowners would pay to rent their own home, rose 0.3%. Rent rose 0.2%. Used cars and trucks rose 0.7%. Airline fares rose 1.2% on the month and are up 22.4% from a year ago. What It Means For The Fed The report arrives two weeks before the Federal Reserve’s next meeting on October 27-28. The Fed raised its benchmark rate by a quarter point to a range of 3.75% to 4.00% on September 16, its first hike in three years, in a unanimous vote. The median projection from the meeting pointed to one more increase before year-end. On Polymarket, traders now see a 43% chance of a quarter-point hike in October, against 57% for no change. How Markets Reacted Stocks fell and Treasury yields jumped after the report. Contracts tied to the S&P 500 dropped 0.6% to about 7,786 in premarket trading. The Nasdaq 100 lost 0.7% to 30,367, and the Dow Jones Industrial Average slid 0.6% to 51,603. Small caps fell the most. The Russell 2000 dropped 1.4% to 2,756. Yields rose across the curve. The 2-year Treasury yield, the maturity most sensitive to Fed policy, climbed 13 basis points to 4.93%. The 10-year yield rose 9 basis points to 5.31%, and the 30-year yield gained 5 basis points to 5.61%. The U.S. dollar index rose 0.5% to 102.38. Gold — tracked by the SPDR Gold Shares (NYSE: GLD ) — fell 1.2% to $4,095 an ounce, and silver dropped 2.6% to $57.62. WTI crude rose 1.3% to $95.37 a barrel. Bitcoin (CRYPTO: BTC) slipped 1.2% to $82,621. Producer prices follow on Thursday, with economists expecting a 0.5% monthly increase. Photo: Shutterstock
66 on Wednesday, reaching its highest level since April 2025 after fresh inflation figures strengthened expectations of further Federal Reserve tightening. 7%. Although the headline figures were broadly in line with forecasts, underlying inflation proved more persistent than expected. 6% annually, reinforcing concerns that elevated energy costs are keeping price pressures high.
At the same time, Brent crude continued to rise on escalating Middle East tensions and their potential impact on supply. However, Fed Vice Chair for Supervision Michelle Bowman said she saw no immediate need for another increase following last month’s hike, despite inflation remaining above target.