The US consumer price index (CPI) will be released on Friday for the first time since 2018, and this time it will be released under highly unusual circumstances.
The September inflation report, to be released this Friday, comes as the government shutdown continues and the release of most other federal statistics has been frozen. That leaves the Fed with limited insight ahead of its crucial Oct. 29 policy meeting.
CPI report gains attention as government shutdown shuts down other key economic data
Other major reports, including employment statistics and retail sales data, will not be released until the shutdown ends. But something will happen differently, as the CPI data will be released just five days before the Fed’s Oct. 29 meeting.
“Something unusual is happening this week…and not just five days before the October 29th Fed meeting,” Adam Kobisi wrote.
The U.S. CPI report is typically released once a month, around the 10th to 13th of the following month. For example, August CPI data was released on September 11th. Meanwhile, CPI data for July was released on August 12th.
By convention, CPI data is released by the Bureau of Labor Statistics (BLS) on Tuesdays or Wednesdays at 8:30 a.m. Eastern Time. For this reason, Friday releases are extremely rare. The last time was in January 2018.
In terms of timing with Fed meetings, CPI is typically released one to two weeks before the Fed’s Federal Open Market Committee (FOMC) meeting. This gives policymakers enough time to analyze the data along with other indicators before deciding on interest rates.
Against this backdrop, the timing is fueling bullish inflation expectations. This could set the stage for further interest rate cuts. The Fed’s next moves are now based almost entirely on this single measure of inflation.
Probability of Fed rate cut. Source: CME FedWatch Tool
The market has priced in a 0.25% rate cut as a near certainty, and investors will be watching to see whether weaker CPI data will prompt policymakers to cut rates more aggressively by 0.5%.
“Right now, the probability of a 0.25% rate cut is about 99%…If it’s lower than expected, it could increase the chances of a 0.5% rate cut,” one user said.
Inflation, shutdowns, and the Fed’s dilemma
Consumer prices are expected to continue rising in September’s Consumer Price Index (CPI) report, according to analysts surveyed by MarketWatch. However, the pace may be slower than in August. Such a signal would mean that inflationary pressures may be easing.
CPI report estimates. Source: MarketWatch
However, the overall picture remains unclear. The ongoing government shutdown disrupts data collection, further heightening political and fiscal tensions that could shape the Fed’s risk calculations.
Without up-to-date data from the labor and retail sectors, policymakers may rely on partial or outdated data when assessing whether inflation has slowed enough to justify continued easing. Friday’s announcement could be the only clear data point before the Fed’s decision next week.
Meanwhile, Fed officials have signaled growing concern about a weakening labor market and support rate cuts. But stronger-than-expected CPI growth could complicate the outlook, forcing central banks to weigh inflation risks against the possibility of growth stalling.
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