ECONOMIC WEEK AHEAD: October 19 - 23

Last week’s inflation reports came in hot. September’s CPI rose 0.6% m/m, lifting headline inflation from 3.4% y/y in August to 3.7%. Core CPI rose 0.3% m/m, taking its y/y rate from 2.4% to 2.6%. Both topped expectations. PPI final demand jumped 1.3% m/m. That pushed its y/y rate to 6.3%, the highest since 2022. Retail sales rose 0.8% m/m, though just 0.2% excluding gas stations.

Odds of a 25bps hike at the October 27-28 FOMC meeting fell from 22% before the CPI report to 17%, despite the hot inflation data. Fed Chair Kevin Warsh offered no signal on October's meeting at the IMF and World Bank annual meetings in Bangkok on Friday. “I don’t prejudge meetings,” he said. Odds of a December hike rose. We still expect the Fed to reverse the remaining two of last year’s three 25bps “insurance” cuts. Fed officials are now in their pre-meeting blackout period.