US inflation accelerates to 3.7 percent as bond yields initially rise

United States inflation accelerated in September, triggering an immediate rise in bond yields and driving market expectations for a central bank rate increase. According to MoveSmartly, the US Consumer Price Index rose to 3.7 percent year-over-year in September, up from 3.4 percent in August. On a month-over-month basis, consumer prices increased by 0.6 percent. [1]

Core inflation, which excludes volatile food and energy costs, also picked up during the period. MoveSmartly reported that core Consumer Price Index growth rose to 2.6 percent year-over-year in September, compared to 2.4 percent in August, and advanced 0.3 percent month-over-month. All metrics exceeded consensus forecasts. [1]

The higher inflation data prompted an immediate reaction across fixed income markets. MoveSmartly reported that US bond yields climbed while traders increased bets on a 0.25 percent rate hike by the Federal Reserve at its upcoming October 28 meeting. [1]

The inflation acceleration follows a period of elevated global price growth. A worldwide surge in inflation began in mid-2021 following economic dislocations, supply chain disruptions, and large-scale fiscal stimulus from central banks and governments. [8]