Gasoline prices surge 9.1% in a month, driving inflation higher

US Treasury yields soar; odds of October rate hike jump to 51%

A customer browses the meat section at a supermarket in Houston, Texas. [AFP]
A customer browses the meat section at a supermarket in Houston, Texas. [AFP]

US consumer prices climbed more than expected in September, driven by a sharp rise in energy costs, with inflationary pressures showing signs of spreading beyond the energy sector — raising the prospect of further benchmark interest rate hikes by the Federal Reserve.

The US Department of Labor said Wednesday (local time) that the consumer price index rose 3.7 percent in September from a year earlier, edging past the 3.6 percent consensus forecast compiled by Dow Jones. On a monthly basis, prices rose 0.6 percent — the largest single-month gain since April.

Core CPI, which strips out volatile food and energy prices, rose 2.6 percent year-on-year and 0.3 percent from the previous month, each coming in 0.1 percentage point above analyst forecasts of 2.5 percent and 0.2 percent, respectively.

Energy prices led the increase. The Department of Labor said gasoline prices jumped 9.1 percent from the previous month, accounting for more than half of the overall rise in consumer prices. On a year-on-year basis, gasoline soared 34.2 percent.

Fuel oil rose 15.3 percent from the previous month and 74.2 percent from a year earlier.

Combined energy commodity prices — including gasoline and fuel oil — rose 9.3 percent month-on-month and 35.3 percent year-on-year.

Beyond food and energy, prices rose broadly across major goods and services categories, including airfares (1.2 percent), used cars and trucks (0.7 percent), education (0.6 percent) and apparel (0.3 percent).

Bloomberg said inflationary pressures were proving wide-ranging across the economy, not just in energy.

Financial markets reacted immediately to the hotter-than-expected inflation data.

As of 9:28 a.m. Eastern time, the yield on the 10-year US Treasury note stood at 5.304 percent, up 8.7 basis points (one basis point equals 0.01 percentage point) from the previous session.

The 30-year Treasury yield rose 5.3 basis points to 5.616 percent.

The policy-sensitive 2-year Treasury yield jumped 12.3 basis points to 4.916 percent.

The data sharply revived expectations for another Fed rate hike.

According to the CME FedWatch tool, federal funds rate futures markets repriced the probability of an October rate hike to 51.5 percent, up sharply from 22.1 percent on Wednesday.

With concerns growing over entrenched inflation, analysts expect the soaring cost of living to emerge as a major issue ahead of the November midterm elections.


mokiya@heraldcorp.com