Hot September CPI sends rate-hike bets soaring

Consumer prices in the United States surged in September, with a significant rise in gasoline costs prompting speculation about an interest rate increase later this month. The Consumer Price Index (CPI) rose by 0.6% in September, up from 0.4% in August, while the year-over-year increase reached 3.7%, higher than the earlier forecast of 3.6%.

Gasoline prices jumped by 7.1% in September, according to data from the US Energy Information Administration. When excluding food and energy prices, the CPI rose by 0.3%, matching the gain in August. Core CPI inflation, which excludes volatile items, increased by 2.6% over the year, up from 2.4% in August. The US central bank's target inflation rate is 2%, and the core CPI is currently lagging behind the broader PCE inflation, which rose 3.0% in August.

Stocks, bonds, and the US dollar index all reacted to the data, with stocks opening lower and bond yields rising sharply. Analysts are divided on whether the Fed will hike interest rates at its upcoming meeting in two weeks, with some expecting a rate hike in December. Analysts point to rising energy prices and core inflation as factors contributing to the upward pressure on inflation, which could force the Fed to tighten monetary policy.