CPI Forecasts Show Moderated Inflation in September, Keeping the Fed on Hold

Key Takeaways

• Wednesday’s CPI report is expected to show that core inflation, which excludes food and energy prices, continued to slow last month despite accelerating overall inflation, driven by surging energy prices.
• Economists are watching for signs of surging diesel prices rippling through supply chains, which would mean upward pressure on goods and services prices.
• Markets expect the Fed to leave interest rates unchanged later this month, but Bank of America economists warn a hot inflation print could revive rate hike speculation.

Economists predict Wednesday’s Consumer Price Index report will show key inflation metrics continued to moderate in September, giving Federal Reserve officials breathing room to advocate for a patient approach to future rate hikes.

Wednesday’s report comes as investors attempt to predict the Fed’s next move. Last month, the Federal Open Market Committee, citing stubbornly high inflation and a stable labor market, raised interest rates by a quarter point and penciled in at least one more hike. Officials are focused on reigning in rising prices, and this week’s CPI and Producer Price Index data will be the last inflation readings they get before their next meeting in late October.

For September, economists expect CPI to increase 0.5% after rising 0.4% in August, according to FactSet. Elevated energy prices are expected to drive the year-over-year inflation rate to 3.6% from 3.4% in August. Core CPI, which excludes volatile food and energy prices, is seen rising 0.2% in September, a slowdown from August’s 0.3%. The annual core inflation rate is expected to hold steady at 2.4%.

“You’ve seen supply shocks create a sticky situation,” says Jeffrey Schulze, head investment strategist at the Franklin Templeton Institute, referring to oil supply disruptions in the Middle East, AI-related electronics shortages, and tariff shocks. “But as we move toward 2027, some of these risks are going to start to moderate,” he says. That moderation may already be underway. “I think you see softening across the board [in September].”

September CPI Inflation Report Highlights

• CPI report date and time: Wednesday, Oct. 15, 2026, at 8:30 a.m. EDT.
• CPI is forecast to increase 0.5% in September after rising 0.4% in August.
• Core CPI is expected to rise 0.2% over the month after increasing 0.3% in August.
• CPI is predicted to rise 3.6% year over year after posting a 3.4% increase in August.
• Core CPI is forecast to increase 2.4% over the year, unchanged from August’s rate.

Core Inflation Seen Continuing to Moderate

Though high energy prices are expected to keep overall inflation elevated, economists expect prices to cool under the surface.

Policymakers have been watching core prices closely for evidence businesses are passing higher oil and diesel prices along to consumers rather than absorbing them at the expense of margins. Economists say the oil price shock’s second-order effects are most visible in airfares, which rose more than 2% in both July and August. But they haven’t seen much pass-through in other categories this year, and they don’t believe last month was any different. “I think that’s going to be something that potentially shows up closer toward the end of the year, rather than in the September release,” says Franklin Templeton’s Schulze.

Officials have been eyeing the AI data center buildout for the same reason. Surging demand for semiconductors, networking equipment, and other data center hardware has driven up prices on consumer and industrial electronics. In their September meeting, policymakers judged that AI-related price pressures were increasing and blunting some of the benefits of waning tariff-related pressures.

“Second-round inflation effects from higher energy prices and AI-related demand should remain relatively contained,” wrote Bank of America economists in a recent note. But they warned that “risks appear modestly skewed to the upside,” and could result in a second consecutive 0.3% month-over-month increase in core prices.

While oil and AI spending threaten to aggravate core inflation, many economists and officials are confident that wages are not currently a source of inflation pressure. Some officials last month described wage growth as “moderate and consistent with inflation moving toward 2%.” That assessment was supported by September’s jobs report, which showed job gains and wage growth were weaker than expected. According to Schulze, the report “suggests demand-driven inflation through the labor market is not problematic from the Fed’s vantage point.”

What the September CPI Report Could Mean for the Fed

Wednesday’s inflation data will loom large over the Fed’s deliberations when officials meet again on Oct. 27 and 28. Last month, policymakers voted unanimously to raise rates for the first time since 2023. Chair Kevin Warsh indicated that stubborn inflation was the main factor in that decision.

Policymakers signaled to markets that September’s hike likely would not be a one-off. In their quarterly Summary of Economic Projections, most officials predicted raising rates by another quarter point before the end of the year. A few signaled they were open to hiking by half a point, and two indicated they were comfortable leaving rates unchanged for the rest of 2026.

Investors immediately priced in additional increases after the Fed’s September hike, but the market’s confidence in that call was shaken by dovish remarks from several officials and September’s soft jobs report, which economists say gives the central bank room to be patient. As of Monday, investors saw a 22% chance of an October hike, down from 55% immediately following the Fed’s September rate call.

“I think that the Fed stays on hold [in October], barring an upside surprise that’s meaningfully more than consensus is expecting,” says Franklin Templeton’s Schulze.

BofA economists say a hot core inflation reading “would likely revive speculation that the Fed may need to continue its tightening cycle” this month. That speculation could nudge Treasury yields (already hovering near multidecade highs) even higher and weigh on equities.