American Inflation Rises to 3.7% on the Eve of the Midterms
Consumer prices rose 3.7% in the year to September, above the 3.6% forecast and up from 3.4%, in the last reading before the 3 November elections. Petrol rose 9.1% in the month and accounted for more than half the increase; core inflation reached 2.6%. Treasury yields rose and Wall Street fell.
This is the war arriving in the American shopping basket: energy is up 20.4% on the year and heating oil 74.2%, while food was flat in September. The core figure is what alarms bond traders — Christopher Rupkey of Fwdbonds called it a “shocking inflation report” and said “inflation is alive”. The ten-year Treasury yield rose to 5.242% and the two-year by more than five basis points. The Federal Reserve raised rates in September for the first time in three years and meets on 27–28 October; futures now price a further rise by December as near-certain. For Britain the transmission is through the dollar: sterling is down about a cent on the day.