Consumer Price Inflation Sizzles: What the Pros Are Saying

A key measure of consumer price inflation blew past economists' estimates to hit a 40-year high in September, all but ensuring more aggressive interest rate hikes by the Federal Reserve.

The consumer price index (CPI) rose 0.4% last month vs. expectations for a 0.2% increase, the Labor Department said Thursday. Year-over-year, CPI moderated to an 8.2% gain. However, core CPI, which excludes volatile food and energy prices, jumped 6.6% vs. a year ago to hit a high last seen in 1982. On a month-to-month basis, core CPI rose 0.6%, or the same rate seen in August. 

With inflation showing no signs of slowing despite the Fed's best efforts, it appears that ever-rising interest rates are here to stay. To get a sense of what the experts make of the latest red-hot inflation data, below please find a selection of commentary (sometimes edited for clarity and brevity) from economists, market strategists, investments officers and other professionals.

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• "This was an overall bad inflation report, as inflation was 0.4% during September compared to market expectations of a 0.2% reading. Although the year-over-year rate was slightly lower, at 8.2% in September versus 8.3% in August, the strength in core prices is not a good omen for inflation going forward and assures that the Federal Reserve (Fed) will increase the federal funds rate by 75 basis points during its November FOMC meeting." – Eugenio Alemán, chief economist at Raymond James
• "Today's CPI reading is a sober reminder of how sticky core inflation can be and that the Fed's inflation fight will be a long one. The hot CPI and PPI readings will add additional fire to the Fed's aggressive rate hike campaign, especially after yesterday's minutes revealed officials were surprised by just how persistent high inflation has been. The market's steep drop following the data may indicate any lingering hopes of a Fed hike slowdown have been crushed." – Mike Loewengart, head of model portfolio construction at Morgan Stanley Global Investment Office

• "This is one of the last major economic prints before the next FOMC meeting on November 2, when the Federal Reserve is expected to raise rates by 0.75%. The larger-than-expected core print will likely increase chatter of a 1% rate hike, with OIS now showing risk neutral pricing midway between a 0.75% and 1% hike. Market estimates for the terminal rate have also moved up to about 4.85%. Given how fast the Fed is moving, it is likely we will see a meaningful economic slowdown. Recent Fed speak has acknowledged that some pain to households and businesses is an 'unfortunate cost of reducing inflation.'" – BlackRock's Gargi Chaudhuri, head of iShares Investment Strategy Americas
• "In a word: 'Uneven.' September headline inflation eases slightly to 8.2% year-over year from 8.3% in August. Inflation in September was uneven across sectors. For example, used car prices declined for the third consecutive month but rent and medical care prices continue to accelerate. The nagging pressure on core inflation will likely put pressure on the Fed to stay aggressive in its fight. The biggest risk is inflation becoming entrenched in some sectors such as services as inflation cools in other sectors. The U.S. dollar will likely strengthen as the Federal Reserve keeps tightening in this uneven inflationary environment." – Jeffrey Roach, chief economist for LPL Financial 
• "Core inflation continues to run hot, which will keep the Fed hiking rates aggressively near-term. While inflation is still way too high, and core inflation is at a new generational high, the Fed is unlikely to increase the increment of its rate hikes. Risks to interest rates are balanced. To the downside, the global outlook is looking very wobbly, which could turn into a downturn painful enough to rapidly suck inflationary pressures out of the economy. To the upside, the last few months' serial upside surprises in core inflation could be the early stages of a prolonged stagflation that would force the Fed to keep rates higher for longer." – Bill Adams, chief economist for Comerica Bank

• "The Fed has more work to do, and the market knows it. The unstoppable dollar adjusted accordingly, while the futures market turned negative. To be sure. The CPI is a lagging indicator, but until inflation shows definitive signs of falling at a faster clip, the Fed's rhetoric – that we're now conditioned to – will continue. The transition towards a slower pace of rate hikes, or even lower rates following the expected 75 basis point [1 basis point = 0.01%] move on November 2, is still elusive until the Fed is convinced that victory against inflation is complete --- or, that something breaks as cracks in the global financial fault line deepens. Whichever comes first." – Quincy Krosby, chief global strategist for LPL Financial
• "For investors this should bring more short term volatility, with equity futures down following the release while Treasury yields rose. Looking forward this also raises the stakes for future Fed meetings, with large rate hikes at the December and February meeting potentially in play if we don't see sustained evidence of moderating inflation. While the Fed has made it clear that they're looking to fight rising prices, the path of pace of future rate hikes remains uncertain, which could lead to further turbulence through the rest of the year." – Sam Millette, fixed income strategist for Commonwealth Financial Network
• "The pressure on the Fed to tighten more aggressively is building, with the rates market now fully pricing in a 75-basis point hike at the November meeting and up to a 50% chance for a similar move in December. Equities have reversed course in a big way, and the 10-year T-note yield has moved back above 4%, which to me represents a buying opportunity because recession odds just took a giant leap forward, and there has never been a recession that didn't see long Treasuries rally." – David Rosenberg, founder and president of Rosenberg Research
• "The good news is from here, it should get easier from a comps perspective as this September's release is the last month that will be replacing an unusually low month-over-month number from 2021. Starting with next month's release (October) through June 2023 we will have a much higher month-over-month comp that will need to be surpassed in order to keep year-over-year inflation elevated. Bottom line: the economy isn't breaking. The jobs market continues to remain strong and wage pressure is at levels we haven't dealt with since the 70s. Companies are passing through cost to consumers and consumers are accepting it even as input prices are softening. The Fed was running nominal GDP at double digits...that is not normal. They've let the inflation cat out of the bag and right now the tightening that will follow will be uncomfortable but necessary to bring inflation down to a realistic level." – John Luke Tyner, fixed income analyst at Aptus Capital Advisors

• "This is not what the Fed wants to see six months into one of the most aggressive tightening cycles in decades. The report cements expectations for (at least) a fourth straight 75 bp rate hike on November 2, and will heighten speculation of a similar-sized move in December." – Sal Guatieri, senior economist at BMO Capital Markets
• "The Fed is trying to get inflation under control, but you wouldn’t know that looking at today's CPI data. Core inflation increased 0.6 percent in September from the month prior, in line with the average rate of monthly increases this entire year. While energy prices are falling, services inflation in shelter and transportation is running hot, forcing consumers to make tough spending decisions through year-end." – John Leer, chief economist at Morning Consult 
• "Today's CPI report should lock the Federal Open Market Committee into yet another supersized 75 bps rate hike at its November 2 meeting. Past that, we believe that inflation will start to slow enough such that the FOMC will feel comfortable downshifting to a 50 bps rate hike by its December meeting. That said, 50 bps of tightening would still represent a very rapid pace of monetary policy tightening, and it would reflect the still stubborn inflationary pressures in the economy. Core CPI inflation has registered a 6.0% annualized rate over the past three months, and it will take a lot more than some gradual slowing before the FOMC feels it has this problem firmly under control." – Sarah House, senior economist at Wells Fargo