Source: Economics Group of Wells Fargo Bank, N.A.
Summary
The overall progress in reining in decades-high inflation should be on display with the September CPI report. We look for the headline to advance 0.1%, which would bring the year-over-year rate down to 2.3% and point to headline PCE rising 2.0%—directly on the FOMC’s target in what will be the last read on inflation before the Committee’s November 7 meeting.
Reducing core inflation remains more of a grind. We estimate the CPI excluding food and energy will post another “low” 0.3% increase (0.26% unrounded) in September, which would lead the year-over-year rate to slip back to 3.2%. Although we expect a similarly-sized gain as in August, the drivers are likely to be different. Core goods prices look poised to take a temporary breather from the deflationary trend we believe is still underway, while core services inflation should moderate amid smaller gains in shelter and travel prices.