US September inflation data is due Wednesday, and forecasters expect gasoline to push the annual headline rate to 3.6% from 3.4%. Core prices are seen cooling to 0.22% for the month, so the market reaction hinges on whether core meets that call.
US CPI for September is due Wednesday at 1230 GMT (0830 US Eastern), and the median forecast of 14 forecasters compiled by The Wall Street Journal sees headline CPI up around 0.6% for the month.
That would lift the annual rate to 3.6% from 3.4%. Core prices, which exclude food and energy, are seen rising 0.22%, slower than August's 0.29%, leaving the annual core rate at 2.4%.
Gasoline drives the headline forecast
The headline boost reflects gasoline. US pump prices averaged above $4.30 a gallon in September, a record for the month, as the war involving Iran keeps crude prices high.
Headline forecasts are tightly grouped, with Morgan Stanley at the top on a monthly basis and JPMorgan slightly below the pack.
Forecasters split on core
The core picture is less settled. Deutsche Bank has the softest call at 0.16%, Citigroup and JPMorgan are both at 0.18%, and Goldman Sachs, Barclays and Morgan Stanley sit at 0.24%.
That difference matters for the annual rate. Roughly half of forecasters, including Bank of America, Goldman Sachs, Barclays and Morgan Stanley, expect core to edge up to 2.5% year on year, while the rest, including Citigroup, Deutsche Bank and JPMorgan, see it holding at 2.4%.
Part of the expected cooling reflects a one-off. Barclays and Morgan Stanley have noted that an unusual jump in wireless phone service prices lifted August's core reading by around 0.1 percentage point and should partly unwind.
Fed officials debate whether inflation is broadening
The release lands as Fed officials debate whether inflation is broadening. On Tuesday, Richmond Fed President Tom Barkin said inflation is proving enduring, and Boston Fed President Susan Collins said she is watching how widespread price pressures are. New York Fed President John Williams argued the economy is not overheating.
A firm core print would strengthen the first camp. A soft one would support Williams' view that the pressure stems from specific shocks.
The Fed's Beige Book follows later on Wednesday, ahead of the October 27-28 policy meeting, where markets currently expect the central bank to hold before a December rate hike.
Source: Investinglive
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