A notably hotter-than-expected reading for core consumer prices is both cementing the case for faster rate hikes and hammering stocks in pre-market trading.
U.S. inflation slowed modestly last month, data from the Bureau of Labor Statistics indicated Thursday, but core consumer prices spiked higher for a second consecutive reading, cementing the case for big Fed rate hikes between now and the end of the year.
The headline consumer price index for the month of September was estimated to have risen 8.2% from last year, down from the 8.3% pace recorded in August but faster than the Street consensus forecast of 8.1%.
On a monthly basis, inflation was up 0.4%, the BLS said, compared to a 0.1% reading in August, a flat reading in July and the Street forecast of a 0.2% acceleration.
So-called core inflation, which strips-out volatile components such as food and energy prices, rose 0.6% on the month, and 6.6% on the year, the report noted, with both the annual and monthly reading coming firmly north of Street forecasts.
On Wall Street, U.S. stocks reacted sharply to the faster-than-expected readings, with the S&P 500 marked 63 points lower in the opening hour of trading while the Dow Jones Industrial Average fell 405 points.
Benchmark 10-year Treasury note yields rose 12 basis points to 4.005% while 2-year notes added 15 basis points to 4.424%. The U.S. dollar index, which tracks the greenback against a basket of its global peers, jumped 0.37% to 113.125.
The CME Group’s FedWatch is pricing in an 86% chance of a 75 basis point Fed rate hike next month in Washington, up from just 49.8% in mid September, which would take its target rate to between 3.75% and 4%.
