U.S. Core Inflation Beats Forecasts, Raising Odds of Fed Rate Hikes

U.S. core inflation rose more than expected in September, reinforcing the view that the Federal Reserve must do more to control price pressures. The hotter data has increased market expectations for further interest rate hikes. Core inflation increased 0.3% month-over-month and 2.6% year-over-year, exceeding consensus forecasts of 0.2% and 2.5%. The rise was driven by shelter, energy, airfares, and used vehicles, while headline CPI matched expectations at 0.6% monthly and 3.7% annually. Risks are skewed toward more policy tightening than currently expected, though benign wage growth and a weak housing market suggest scope for an eventual reversal. Rising refined fuel prices also risk feeding into broader categories.