The Fed should hike in October, but won’t until December.
The BLS reports the Consumer Price Index for All Urban Consumers (CPI-U) increased 0.6 percent on a seasonally adjusted basis in September after rising 0.4 percent in August.
Over the last 12 months, the all items index increased 3.7 percent before seasonal adjustment.
The BLS rounds to 1 decimal point. I round to 2 decimal places
CPI Month-Over-Month
- All Items: 0.65 percent
- All Items Excluding Food and Energy: 0.33 percent
- Food and Beverage: 0.05 percent
- Shelter: 0.39 percent
- Owners’ Equivalent Rent: 0.35
- Rent of Primary Residence: 0.25
- Medical Care Services: 0.28 percent
- Medical Care Commodities: -0.66 percent
- Energy: 5.20 percent
- Gasoline: 9.09 percent
- Food at Home: -0.07 percent
- Food Away from Home: 0.23
The only bright spots, assuming you believe them, are medical care commodities and food at home.
CPI and Core CPI Month-Over-Month
The BLS was .001 away from reporting headline CPI at 0.7 percent instead of 0.6 percent.
I calculate to two decimal places as 0.65 percent,
CPI Month-Over-Month Energy, Gasoline, Utilities
Energy, Gasoline, Utilities and Fuel Month-Over-Month
- Energy: 5.20 percent
- Gasoline: 9.09 percent
- Utilities and Fuel: 0.53
Last month I said “Looking ahead, Trump’s moves in the strait will cause gasoline prices to jump again in September.”
Here we are.
CPI Month-Over-Month Food
Month-Over-Month Food
- Food and Beverage: 0.05 percent
- Food at Home: 0.07 percent
- Food Away from Home: 0.23 percent
The BLS weights food at home as 8.23 percent of the CPI. It weights food away from home at 5.29 percent of the CPI.
Actual spending is reversed. Thus, the food and beverage percent is much higher every month than reported.
CPI Month-Over-Month Shelter
Shelter is over 35 percent of the CPI. If shelter has bottomed, and I believe so, it will add upward pressure on the CPI.
CPI, Shelter, and PCE Year-Over-Year
Year-Over-Year CPI and PCE Percent Change
- CPI: 3.7 percent
- CPI Shelter: 3.2 percent
- CPI Excluding Food and Energy: 2.6 percent
- PCE: 3.7 Percent (August)
- PCE Excluding Food and Energy: 3.3 Percent (August)
CPI Year-Over-Year Food
CPI Year-Over-Year Food Details
- Food and Beverage: 2.4 percent
- At Home: 1.8 percent
- Away from Home: 3.5 percent
Because the BLS underweights food at home and does not include tips, food and beverage at 2.4 percent is understated.
CPI Core Services vs PCE Less Food and Energy
Core Services M/M and Y/Y
- CPI Core Services M/M: 0.37 percent
- CPI Core Services Y/M: 3.16 percent
- PCE Services Less Food and Energy M/M: 0.20 percent (August)
- PCE Services Less Food and Energy Y/Y: 3.34 percent (August)
This is the key chart in this post because the Fed’s preferred measure of inflation is PCE excluding food and energy.
The Fed has missed inflation targets for 63 straight months on PCE and 65 straight months on the CPI.
I fail to see how anyone can get a rate cut or even a rate hold out of that chart.
CPI and PCE Are Both Understated
- Neither measure counts property taxes, homeowner’s insurance, or home prices.
- Food is understated because of improper weights.
- Medical insurance costs are ridiculously calculated based on retained earnings, not consumer prices.
Yet, economists wonder why people are more upset about inflation than what the numbers show.
Another Fed Rate Hike Coming but Delayed
Last month I said “A rate hike in September is all but certain after this report.”
And so it was.
I also said there would not be a hike in October, but there should be. This report sealed the “should be” aspect.
However, the Fed went out of its way to issue forward guidance when a parade of Fed governors and presidents pushed back on an October rate hike, without mentioning the obvious reason.
I never expected a hike because the next meeting is October 28, just 6 days before the midterm elections.
Following the parade of Fed yaps, rate hike odds for October plunged from over 60 percent to 20 percent, now back up to 33 percent today (but headed to zero).
Fed Chair Kevin Warsh stopped forward guidance in theory, but not practice, The Fed will always find a reason to do what it wants and telegraph it, forward guidance or not.
As of now, expect a December hike. There is no November meeting,
Related Posts
October 7, 2026: Long-Term Bond Yields Surge to New 24-Year Highs
What happened to Bessent’s “I am the house” theory?
October 9, 2026: Consumer Sentiment Current Conditions Index Drop to Record Low
By political affiliation, sentiment declines the most for independents.
October 13, 2026: Existing-Home Sales Meander Nowhere for Nearly Four Years
Since December 2022 sales have gone nowhere.
The FOMC is shirking it’s duties. It is at “in your face” levels.
It seems that your American Establishment is betting on artificial intelligence to get us out of all this (discussed by the 37 comments below at the time of writing). I think advancing technological knowledge has saved us from collapse caused by the moral decadence that always develops in successful societies, for quite a long time already. John Mauldin, the financial writer, suggested a few years ago that having advancing technology save us was his only real hope for the future.
I think we have to take a step beyond Machiavelli’s insights into the nature of government (which are universally taken for granted nowadays, I think, even by people who have never heard of him), and accept that government is necessarily successful organized crime, made up essentially of soldiers (who live by force) and priests (who live by deception). Government has a monopoly of force and a monopoly of fraud. I follow C. S. Lewis in saying that the real organization is never exactly the same as the formal organization, and I include journalists among the priests, although they are not formally part of the government. The banking system and corporate ownership tie them into it.
America has got into a horrible position, and President Trump is now suggesting writing off the debt by means of inflation. That has been done before, such as after World War Two, but I don’t think it has been done on the scale that would be required now. Such inflation would lead to starvation among older people and all the less necessary workers who exist by taking care of older people, I think. It would lead to better times, comparatively, for all the people who produce essential goods. The vermin in the government who exist by interfering in trade would presumably have their wings clipped. I’m not looking forward to it because I and my friends are among the older people who will get the chop.
Nobody points it out, but an awful lot of older people must have starved during the great inflation in Germany and Eastern Europe, 1919-1923. They must have starved again when the German currency was cancelled again after World War Two.
President Trump, as a successful real estate developer, seems to take the view that there is always some way to solve a problem. I hope there is, but the history of past inflations suggests to me that it isn’t going to be fun for anybody. The French Revolution grew out of a financial collapse, and I am not sure that it wasn’t worse than the horrors of the two world wars in the twentieth century.
Few remember the 70’s. A scandal in the mid 70’s was seniors subsisting on dog and cat food. At that time, there was no COLA on Social Security, and the inflation was killing retirees. Later, Carter instituted COLA adjustments to help seniors.
i loved the 70s. great concerts in central park. sold beer and soda on gas lines as a teenager. to cops even. wonderful time to be alive. of course many old geezers got hosed.
You were a child. It was quite different in survival mode, the county I grew up in had 25% unemployment, fortunately I was gone by then. I assume the yippee child didn’t eat cat food for dinner.
It was actually Nixon that signed the 1972 bill that provided for COLAs beginning in 1975.
https://www.ssa.gov/history/Nixon72.html
Really, I’m 81 so memory lapses are a regular thing.
So CPI up at an annual rate 7.8% while SS COLA up 3.6%. That’s going to be real popular.
Even more popular in 2032 when there is only money to pay out 78% of benefits. Lol. Have you picked out the underpass you’ll gonna be living under yet?
my game plan is knock on the doors of all my rich friends and family and ask if i could spend a weekend. and not leave. until i’m booted out. then on to the next one. rent and food. zero
Another GIGO report about inflation from the Bureau of Lying Statistics.
Inflation M/O/M at least 1%.
[…] October 14, 2026: CPI Hotter than Expected in September, Up 0.65 Percent […]
Consequences of the Iranian war….higher energy prices are beginning to filter down into the price of just about everything. What a clusterf**k. I expect inflation to get worse, not better.
I listened to a little conservative talk radio today while driving – Hugh Hewitt and that lummox Sean Hannity. Both of them were talking about “Bidenflation”. Biden’s term feels like a lifetime ago. Very rich of Hewitt to talk about inflation and not mention Trump’s war on Iran, since he’s the quintessential neocon who is in favor of all wars. I think the Dems are going to almost sweep the senate races.
hugh hewitt is a very talented propagandist. for stupid people. morning glory
You don’t really need to be all that talented to scam the MAGAs.
well Hugh H. is really really talented. being a talk radio host is extremely tough job. one of my best friends out in AZ did it for decades. he got tossed off 2 stations for speaking the truth about post 9.11, madness about going into iraq……….he ended up just buying his own station.
Speaking the one truth about 9/11, or his truth, or what? I think I can see where that topic heads 99% of the time.
I think the technical term for Hugh Hewitt is “despicable prick”.
The supply of stupid people in the USA is at an all time high, most are voluntary participants.
ha ha ha. being dumb became kewl in the 1950s. see fonzie in happy days.
Hannity (aka Wallbangeras Savage used to call him) is a jackass. i was flipping through radio channels a few weeks ago trying to catch a local news report and he was saying “most important election in our lifetime.”. Which he has said ever 4 years since forever. And Hewitt like all Neocons should be dropped in the middle of the Sunni triangle with a load out of infantry gear and left to be Ghaddafi’ed.
The biggest and worst mistake this country has ever made, was creating the Federal Reserve in 1913! NOTHING else comes even close! The USA does not have Free Markets, or Capitalism, those dies in 1913 !
Devastating “next worse” mistakes around the same time. The Lost Generation freaks and misfits leading the way.
“He Kept Us Out Of War!” … WWI – The War To End All Wars
16th Amendment
17th Amendment
18th Amendment
19th Amendment
Wilson was by far the worst US President ever.
LOL!
at the time, perhaps
bingo. winner. creature from jekyll island explains the scam of the fed the best. those good ole boys from NYC worked on it for decades since the first 2 central banks of usa had gone kaput.
There is no apples to apples comparison to the First National Bank Act and the 1913 Federal Reserve Act.
The federal reserve promised to end financial panics. I think they not only create panics but were instrumental in the depression.
Reserve curency status allowed enormous over spending post WW2. Not a mistake as such, more an invitation to gorge. It won’t be enjoyable on the downward slope.
Obviously this will not end anytime soon. A cycle long delayed. “No where to run” comes to mind from a fabulous scene in Good Morning Vietnam.
Kevin Warsh is the “new” Arthur Burns.
Inflation and interest rates are going up as long as the US continues to spend more than we tax and borrow or print into existence the deficit. Market vigilantes see this for what it is and will demand higher rates to compensate for lost purchasing power of their bond principle or just not purchase bonds. The fed cannot change that, only congress can, and if congress does not, Mr. Market will without concern for any social issues, only to minimize losses. It will be ugly and to see how it might start, have a look at the unrest in France. It has roughly the same debt and deficit numbers we have relative to GDP, but they surrendered their monetary sovereignty when they joined the Euro, so they cannot print to extend and pretend their problem.
Exactly
The belief that inflation is independent of govt balance sheet needs a revisit
The US has to run deficits as long as it issues the reserve currency.
I believe you are confusing trade deficits with international trading partners and domestic fiscal deficits.
feral is correct.
The dollar being the reserve currency means our trading partners want to hold dollars and not trade for American made products. they need dollars for their reserves.
dollars wind up in foreign banks, and they want to a return on these funds so they invest in American assets.
federal debt is the safest asset for them to hold, and is the cheapest way for Americans to get their dollars back, so we run deficits.
so yes, being the reserve currency almost guarantees a federal deficit.
I do not comprehend how trade partners holding dollars has anything to do with the federal government spending more than it receives in revenue. I do understand why the US economy must run a deficit if we have the reserve currency.
China has to hold dollars and it does not want to buy US manufactured products. So it buys US treasuries to get a return on those dollars. Treasuries are produced by budget deficits.
And $32+ trillion debt not held within the government is not enough to meet the demand, so we need to add $2 trillion a year? China holds about $1 trillion in total US federal debt.
The fed keeps screaming it is independent so why should it matter if there is an election happening or not? What exactly would a 0.25 rate hike do for the election anyway? The stock market has shrugged off the 10 year at 5.25 so far and I doubt a meager 0.25 would change anything.
If Walrus wants to be seen as a true independent leader then he needs to do what needs to be done. Perhaps he should institute a new policy that states in October we will have an automatic rate hike/cut regardless of the election.
Do worry, Trump, Walrus, GOP, and democrats will find a way to make things even worse.™
It’s Trump turtles all the way down and inflation all the way up!
You are correct. We will find out if walrus has balls or not. Mish is betting on the not…
Rate action so close to the election would not be about policy reality, it would be about the perception of the Fed’s behavior. They won’t do it precisely because inaction close to elections helps to preserve the faith in their independence.
I agree with your sentiment, if they are independent they should do what they believe is right, but that presupposes faith in our institutions, which is dare I say at or close to a historic nadir.
interest rates and inflation…….move in 20 to 40 year cycles over the past few centuries. get your bellbottoms and vinyl records and bongs out. back to the 70s. i sold soda and beer on gas lines in NY with only a 10x mark up from beverage dispensary. cops bought beers from us. teenagers. ha ha ha. bombs away with the crumbling empire.
But your very story reminds us that we came back, in whatever form. If it was, or is, a “crumbling empire,” the crumbling has taken a very long time. Imperial presidency worries, a losing war, stagflation, Iran woes, malaise, et cetera, we had all that. It was easy to think those were end times. But look, here we are, still with some cards in hand. Weird. We just can’t seem to screw things up badly enough to take ourselves out of the game. So far. Will it really, really, really, finally be it, this time? Nobody knows. if they did, they could at least become rich, before the shithouse goes up in flames.
If I learned anything, it is that the species and the world are far more resilient than I had thought. My model was in error every time. And my bets, my discounting of the future, generally matched that error rate.
pro tip. crumbling evil empires are measured in decades. the spanish empire took the entire 1800s to keep on crumbling to the end in 1898. which they welcomed with a half hearted attempt to keep their manliness while retreating from the amerikans bombing cuba and PR and phillipines……..they celebrate 1898 in spain.
“Pro tip.” Right, Great One. OK, there have been long declines alongside sudden collapses, in all eras, meaning this this not necessarily a collapse but maybe a slow leak. if one does not have a reliable gauge of when for events, one is drifting. The vital question is not if our world will end, it will, but when, on what path. That will enable one to cope optimally with whatever it is. Otherwise you are trying to sound astute, just flashing some knowledge of various imperial declines. I can do that. That doesn’t model anything. I’ve read my hundreds of history books.
ok dude. let me know how your model works out. i was in russia in the 1990s when the last evil empire crumbled. it was exciting, treacherous and was profitable and potentially lethal and bankrupting if you played your hands wrong.
It’s all good, until it goes bad. But when it turns bad, it’s going to be really, really bad.
Unlikely that Warsh will hike in October since he doesn’t want to incur Trump’s pre mid-terms wrath. But if he does hike I would love to be a fly on the wall in the Oval Office
If federal agents can raid a Representative’s house weeks before an election…
why not? T’is the Golden Age of “No Rules; No Norms”.
Can you imagine when Trump is finally dethroned? His list of blameworthy enemies and excuses will be epic. It already is. His endless disgruntlement will make Herbert Hoover’s seem paltry.
herbert hoover and his wife saved millions of humans lives from starvation in the USSR. he was a wonderful humanitarian. go to stanford U and visit the hoover institute.
Can’t wait to see the designs for the posthumous Donald Trumpstien Memorial Landfill and Sewage Treatment Facility