U.S. September CPI Disappoints, Rising a Faster Than Expected 0.2%

• The CPI rose 0.2% in September and the core CPI rose 0.3%, both numbers stronger than anticipated
• The data reinforces the notion that not only will the Fed not cut rates 50 basis points in November, but might chose to not trim rates at all.
• Already under pressure over the past 10 days, the price of bitcoin fell a bit more following the numbers.

Inflation came in stronger than expected in the U.S. in September, according to the government's Consumer Price Index report released Thursday morning.

The Consumer Price Index (CPI) rose 0.2% in September versus economist forecasts for 0.1% and a 0.2% rise in August. On a year-over-year basis, the CPI was higher by 2.4% against expectations for 2.3% and 2.5% in August.

Core CPI – which excludes more volatile food and energy costs – rose 0.3% in September versus forecasts for 0.2% and 0.3% in August. Year-over-year core CPI was higher by 3.3% versus an expected 3.2% and 3.2% in August.

Under pressure for much of the past ten days, the price of bitcoin {{BTC}} fell further following the report, last trading at $60,800, down nearly 2% from 24 hours prior.

The U.S. Federal Reserve surprised many in September by beginning its rate-cutting cycle with a larger 50 basis point rate cut instead of the assumed 25 basis point move. The action sparked a sizable rally in crypto prices as investors factored in not just that rate cut but expectations of an equally large move at the Fed's next policy meeting in early November.

Thanks to hawkish comments from Fed Chair Jay Powell (and other central bank officials) and a far stronger than expected employment report last Friday, those expectations, however, have undergone a major reversal over the past ten days, perhaps contributing to the big pullback in crypto prices over that time frame. According to CME FedWatch – which does the service of converting pricing in short-term interest rate markets into odds on what the Fed will do at each of its policy meetings – the chances for a 50 basis point rate cut in November have gone to zero. In fact, rate markets prior to this morning's inflation data had priced in a 26% chance the Fed doesn't trim rates at all – up from 0% one week ago.

Today's inflation numbers are likely to reinforce the idea that the Fed may pause any rate cuts in November, but offsetting the disappointing CPI might be some weak employment data. Initial jobless claims – which had pretty much flatlined at very low levels for many weeks – shot higher to 258,000 last week from 225,000 previously and versus forecasts for 230,000. It's unclear, though, how much the aftermath of Hurricane Helene might have affected the data.