US CPI rose more than expected in September: +0.3% m/m and 1.5% y/y against market expectations for a 0.2% m/m and 1.4% y/y increase. It was a marked acceleration from 1.1% y/y in August. The main reason for the increase of inflation was the surge of energy prices (+2.9% m/m) and of housing costs (+0.4% m/m). However, core CPI softened from 2.3% y/y to 2.2% y/y, signalling that inflationary pressures are contained.
The increase of headline CPI strengthen the possibilities that the Fed will hike rate by 25bp in December as it signals that inflationary pressures could rise in 2017.