Economists polled by Dow Jones expect the headline consumer price index to rise 0.6% for the month and 3.6% compared with a year ago. That 12-month figure would signal that the rate of price growth is accelerating. So-called core inflation, which strips out volatile food and energy prices, is expected to increase 0.2% from August and 2.5% on a 12-month basis. While that would mark a slight slowdown from the prior month, it would be an uptick in year-over-year inflation.
Energy costs have been among the biggest drivers of inflation since the U.S. war with Iran began earlier this year. Brent crude, the global oil benchmark, climbed more than 14% in September and traded around $105 per barrel on Tuesday. President Donald Trump last week announced loosened diesel restrictions on Russia in a bid to boost the global oil trade, though analysts do not believe it will meaningfully bring down prices.
“We’ve got real upside risk on the September CPI,” said Joe Brusuelas, chief economist at tax firm RSM. “Typically, when we have these moves in inflation, everyone’s models undershoot the actual outcome.”
Robert Sockin, chief U.S. economist at asset manager PGIM, said sticky oil prices could also push up costs in other, non-energy categories. In that scenario, it would become harder for the Fed to write off the energy surge as a short-term shock that doesn’t require interest rate increases.
After announcing its first increase in three years last month, the Federal Reserve signaled in meeting minutes that it will likely have to hike rates again. Fed funds futures traders anticipate the next increase at the December policy meeting, according to CME’s FedWatch tool.
“The list of reasons to hike rates in our view is long,” Sockin said. “Ultimately, we have low confidence in the timing of the Fed’s next move, but more conviction on the direction of travel.”
Wednesday’s release is the last reading on CPI before November’s midterm elections.