Today at 15:30 MSK, the market will receive one of the main macroeconomic reports of the week - US consumer inflation data for September. Headline CPI is expected at 3.6% year-over-year versus 3.4% in August. Month-over-month, the figure could add about 0.6% after a 0.4% increase a month earlier.
Why headline CPI could accelerate
The main factor is fuel costs. The average price of gasoline in the US in September remained above $4.30 per gallon. In August, gasoline already rose in price by about 3.9% and accounted for a significant portion of the overall monthly price increase. Against the backdrop of expensive oil, the energy component could again noticeably drive up headline CPI.
What the market will watch more closely
The key indicator for the Fed is core inflation. It excludes the most volatile food and energy categories and better shows the persistence of price pressure. The consensus expects core CPI to rise by about 0.22% month-over-month after 0.29% in August. The annual figure is expected around 2.4-2.5%.
Why the range of forecasts matters
Banks' estimates for monthly core CPI differ noticeably. The lower bound of forecasts is around 0.16-0.18%. The upper bound is around 0.24%. Even a few hundredths of a percentage point can noticeably change expectations for the Fed rate. That is why the market reaction can be strong even with a relatively small deviation from the consensus.
What the market is currently pricing in for the rate
The next Fed meeting will be held on October 27-28. The market estimates the probability of a rate hike at that meeting at about 20%. If core inflation comes in above expectations, this probability could quickly rise. If the figure comes in closer to the lower bound of forecasts, pressure on expectations for further tightening may ease.
Scenario A: inflation above expectations If core CPI comes in around 0.24% or higher, the market may quickly revise its rate expectations. This could support the dollar and US bond yields. At the same time, gold, stock indices and cryptocurrencies may come under pressure.
Scenario B: inflation below expectations If the core figure comes in around 0.16-0.18%, the reaction could be the opposite. Rate hike expectations will weaken. The dollar and yields may move lower, while risk assets and gold could receive support.
What else will be released this week
On the same day at 21:00 MSK, the Fed's Beige Book will be published - a review of economic conditions across US regions. On Thursday, the producer price index will be released. These data will help the market clarify the inflation picture ahead of the Fed meeting.
What matters for a trader
The first minutes after the CPI release are usually accompanied by heightened volatility. Candles widen, spreads become larger, and slippage can increase noticeably. Therefore, the figure itself is no less important than the execution conditions of the trade.
Do you trade the half hour after 15:30?
Different prop programs have different rules for trading during news. In some, trades during CPI are allowed; in others, there is a ban on entering during a certain window around the release, and the conditions for leverage and drawdown calculation may be stricter than usual. It is better to check these points before the data is released.