According to Bureau of Labor Statistics data, the headline consumer price index rose 3.7% year over year in September, outpacing market expectations of 3.6% and higher than 3.4% in August. The gasoline price index rose 9.1% month over month in September, accounting for over half of the monthly increase for the headline inflation. Core inflation, excluding volatile food and energy prices, came in at 2.6% year over year, also above expectations of 2.5% and the prior month’s reading of 2.4%.
The ABA Office of the Chief Economist believes that the hot CPI reading in September shows no alleviation of the affordability pressures households face. Inflation continuing to drift away from the Fed’s 2% target may weigh on consumer and business sentiment, erode purchasing power and dampen real economic growth. This could be a headwind for loan demand, particularly for interest-rate-sensitive products such as mortgages and auto loans.
