This week’s US inflation data sent shockwaves through global markets. September CPI rose 3.7% year over year, the highest in five months and above the market forecast of 3.6% and the previous reading of 3.4%; core CPI rose to 2.6% year over year and held steady at 0.3% month over month for a second consecutive month, both above expectations.
The PPI released soon afterward was just as startling: it rose 6.3% year over year, its biggest increase since December 2022, while the 1.3% monthly gain far exceeded expectations of 0.6%. The spread of energy costs into core sectors is no longer a “concern”—it is happening.

I. Breaking down the data: The “second wave” of energy price pass-through is the real signal
The most concerning aspect of this CPI report is not the 3.7% headline reading, but the structural spread of price pressures.
Gasoline prices rose 9.1% month over month in September, accounting for more than half of the monthly CPI increase, while energy prices were up 20.4% year over year.
But the more important changes were in core components: shelter inflation rose 0.4% month over month, its fastest pace in five months; prices for recreation, used cars, education, airfares, healthcare, and clothing also rose across the board.
PPI data further confirm this chain of pass-through. The goods price index rose 2.6% month over month, with energy accounting for more than 80% of the increase; core PPI rose 0.7% month over month and 5% year over year, while the services price index rose 0.8% month over month, its largest increase since April. This means upstream cost pressures are accelerating as they spread from energy to manufacturing and services further down the supply chain.

II. Rate-hike expectations: A sharp market repricing, from 22% to 43.7%
Before CPI was released, the CME FedWatch tool showed only a 21.6% probability of a rate hike in October. After the data came out, that probability briefly surged to 43.7%, nearly doubling. But by the following day, it had fallen back to 33.8%, while the probability of rates remaining unchanged stood at 66.2%. This “surge and retreat” in market pricing itself shows that the market has yet to reach a consensus.
There are also clear divisions within the Fed. San Francisco Fed President Daly said that “inflation risks have indeed risen, but risks are not the same as reality,” and suggested there was no need to rush to act at the October meeting. Cleveland Fed President Hammack, however, warned that if the public began to believe high inflation would persist for a long time, the Fed might have to take stronger action than currently envisioned.
The divide on Wall Street is even more notable. Goldman Sachs had previously judged that the Fed had ended its current tightening cycle, but turned hawkish quickly after the September rate hike and now expects another hike in October; Morgan Stanley is more aggressive, raising its forecast to three hikes in total and a terminal rate of 4.25%–4.50%, citing insufficient progress on cooling inflation, resilient economic activity, and policymakers no longer viewing the energy shock as temporary. ING and Jefferies, meanwhile, believe the September inflation data may not be enough to prompt an October rate hike.
Core takeaway: Whether or not the Fed hikes in October, market pricing has largely settled on at least one more rate hike this year, with the probability of a December hike above 60%. For futures markets, what really matters is not the precise timing of a hike, but that the macroeconomic constraint of “further tightening this year” is being extended.

III. Key dates: The next two weeks will determine the direction
October 16 (Friday): Fed Chair Warsh will speak at the IMF Annual Meetings, less than two weeks before the FOMC meeting. In his Jackson Hole speech, Warsh explicitly judged that “inflation is more concerning than the labor market” and opposed providing forward guidance. Markets will focus on whether he signals that “October action remains on the table.” Hawkish remarks would put pressure on stocks and gold, while a cautious stance would return the rate-hike debate to a data-driven footing.
October 27–28: FOMC meeting, just six days before the midterm elections. Raising rates on the eve of an election carries significant political sensitivities, and FOMC members may be “very reluctant to do so.” But Jefferies’ chief economist noted, “Judging by the details of this report, it is very difficult for the Fed to find a reason to keep rates unchanged in October.”
December rate-setting meeting: If the Fed holds steady in October, the probability of a December hike is above 60%. Morgan Stanley expects another move may still be possible next March.

IV. Futures market outlook: What history tells us
Historical statistics across seven rate-hiking cycles since 1983 show that WTI crude rose in six of them, with an average gain of 25.6%, making it the best-performing major asset class during hiking cycles.
Gold rose in three cycles and fell in two, averaging a 15.8% gain—the key factor is real interest rates: if inflation expectations rise faster than nominal rates, real rates actually fall, benefiting gold. During the Fed’s 17 consecutive rate hikes from 2004 to 2006, global demand growth and supply constraints still drove significant gains in metal prices, showing that the simplistic view that “rate hikes are bearish for commodities” does not hold.
In the current environment, for gold, an October FOMC rate hike could present a good opportunity to build positions, and the “buy the rumor, sell the fact” effect after a hike is worth watching; base metals face a “macro headwind, industry support” backdrop, with copper mine TC down to a near-decade low of -$237.8/ton, reinforcing the supply shortage narrative, and copper prices may prove relatively resilient against a rate-hike backdrop;
For energy and chemicals, fuel costs are the main source of the recent inflation spike. Retail diesel prices are nearly 70% higher than before the conflict, and if oil prices remain elevated, they will directly strengthen rate-hike expectations, while short-term volatility in energy and chemical products may remain high;
Ferrous metals may continue to trade weakly within a range amid a moderate policy stance.

V. Key takeaways
First, the “second wave” of inflation pass-through is gradually becoming reality rather than a concern. Energy prices are spreading throughout the economy through transportation costs, housing rents, and services pricing, meaning core inflation may not quickly ease even if oil prices retreat in the short term.
Second, the “gap in rate-hike expectations” is the key variable driving futures pricing, not the rate hike itself. Asset prices see their biggest repricing when markets switch from pricing in a “pause” to pricing in “further hikes.” We are currently in that transition window.
Third, traders should consider reducing directional exposure and increasing sensitivity to volatility over the next two weeks. Implied volatility in crude, gold, and copper is likely to rise around Warsh’s speech and the FOMC meeting. Watch for “expectations-gap trades” after the October 28 meeting: if a hike is delivered, gold and base metals may find a recovery window as the bearish news is priced in; if the Fed holds steady, beware of further increases in December rate-hike expectations continuing to weigh on risk assets.
Fourth, keep an eye on oil prices. Energy prices hold much of the power to determine the inflation path. If crude continues to rise, the probability of an October hike will climb further; if oil prices fall, the Fed may have room to wait. The interplay between geopolitical developments and inflation data may continue to dominate pricing logic in global futures markets over the coming weeks.

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