A closely watched inflation report due Wednesday is expected to show intensifying price pressures in the United States. Economists polled by Dow Jones forecast the headline consumer price index for September rose 0.6% for the month and 3.6% compared with a year ago. That 12-month increase would signal accelerating price growth moving further from the Federal Reserve's 2% target.
Energy costs have been a major driver of inflation since the US war with Iran began earlier this year. Brent crude prices climbed more than 14% in September, bringing third-quarter gains to about 42%, and traded around $105 per barrel on Tuesday. Joe Brusuelas, chief economist at RSM, warned that oil-related prices could push the headline figure even higher than expected.
Core inflation, which excludes volatile food and energy prices, is forecast to increase 0.2% from August and 2.5% on a 12-month basis. While that represents a slight slowdown from the prior month, it would mark an uptick in year-over-year inflation. Robert Sockin, chief US economist at asset manager PGIM, noted that sticky oil prices could also push up costs across non-energy categories.
The report comes as the Federal Reserve faces pressure to raise interest rates. The central bank announced its first rate increase in three years last month and signalled it will likely hike again. Fed funds futures traders anticipate the next rate increase will come at the December policy meeting.