US Economics: Inflation Weekly – September surprise

Core CPI at 2.56% YoY in September is stronger than the 2.3% by Q4 that Citi was forecasting a few months ago, with a 0.33% MoM increase showing most details modestly stronger than the 0.18% forecast. But of the 15bp upside surprise, about 10bp was due to stronger owners' equivalent rent and used car prices, which are not expected to repeat. Annual core inflation readings over the next few months will be distorted by issues related to last year's government shutdown, but Citi continues to expect softer monthly readings in Q4. Core PCE is expected to rise 0.31% MoM in September, lifting the annual rate to 3.1% YoY and the 3-month annualized pace to 2.8% from 2% in August. There will be no annual core CPI reading for October, November core CPI will be somewhat too high YoY given shutdown-related collection issues last November, and core PCE annual readings will also be affected;