CPI -1.3% YOY To September, Core CPI +1.5% YOY, Inflation Fears Less But Brewing

The US Consumer Price Index, which measures inflation at the consumer level of the economy, was +0.2% in September and -1.3% year-over-year through September. Excluding volatile oil and food costs from the readings, “Core” CPI for September was +0.2% and +1.5% YOY through September. You can view and download historical CPI data by scrolling down to our Data section on the right side of the site.

Inflation is within the Fed’s comfort zone of 1-2% even though it was higher than expectations. Since February, when deflation concerns were driving markets, we’ve see-sawed each month from economic weakness to inflation fears, which cause rates to fall and rise respectively. Rates are tied to bond trading and bonds don’t like inflation so they sell off on inflation fears, pushing price down and yield (or rate) up. Inflation concern in August was from rising oil prices represented by an 8.8% increase in motor fuel on category on the CPI report, by far the biggest contributor to inflation. That category dropped all the way to 1.1% for September, but may go higher next month since oil has been moving higher again.

In a longer-term sense, many market participants feel inflation is the ultimate effect of massive government stimulus. Conversely, market traders think inflation shouldn’t be an issue for some time because aggregate demand is compromised by weakened consumers and businesses. Meanwhile the bond markets and rates see-saw wildly as these two schools of thought battle each other in market trading daily, weekly, monthly. Oil price volatility is the key driver this year.