The Fed raised interest rates in September—marking the first such move since 2023—and attention has now shifted to the September CPI data due on Wednesday. This figure will serve as the final inflation reading prior to the Fed's decision on October 28. Markets are currently pricing in an approximately 82% probability that interest rates will remain unchanged in October, implying an 18% chance of a hike.

At the September meeting, the policy rate was raised by 25 basis points to the 3.75%–4.00% range. This was the first increase since 2023. Meeting minutes indicate that a majority of officials considered another hike before year-end to be appropriate; however, this does not necessarily imply that October is the target month. The minutes emphasize a "data-dependent" approach and offer no clear guidance regarding the October meeting.

The September CPI data, set for release on Wednesday, will help clarify this uncertainty. Market expectations point to headline inflation rising from 3.4% to a range of 3.6%–3.7% on an annual basis. This increase is largely expected to stem from rising energy prices. Meanwhile, core inflation is projected to remain more moderate, aligning with the expectation that the Fed will hold rates steady in October.

Other key data releases for the week include the PPI, retail sales, and jobless claims, all scheduled for Thursday. These figures will shed light on inflation trends at the producer level and the strength of consumer demand. Also to be watched is the discussion Fed Governor Kevin Warsh will hold with IMF Managing Director Kristalina Georgieva on the evening of the same day. This conversation could offer clues regarding the Fed's policy framework.

In summary, the week's agenda focuses on data that will shape the Fed's October decision. If the CPI data provides a clear signal regarding the direction of inflation, expectations for the Fed's interest rate path will be adjusted accordingly.

This article does not constitute investment advice.
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