US Consumer Price Inflation (CPI) surprised on the upside once again. The report ensures at least another 75 bps rate hike in November, in the opinion of economists at ABN Amro.

Sticky services inflation hits 40-year high

“Core CPI inflation surprised again to the upside in September. The core CPI rose 0.6% MoM, taking annual core inflation to 6.6% YoY. Worryingly, services price growth hit a new 40-year high of 0.8% MoM, driven by a pickup in shelter inflation (0.8%), but helped along by continued strength in medical services and transportation. This is around three times the monthly pace of price growth prior to the pandemic.”

“The inflation surprise seals a 75 bps hike taking place at the November FOMC meeting, and it raises the risk that the Fed may go even further than our current base case of the fed funds rate topping out at 4.5% in the upper bound.”

“We think the Fed will be confident it has done enough to tighten monetary policy by the end of the year. But it will very much depend on the data.”