Could the upcoming CPI data potentially alter market expectations regarding the Fed’s rate decision?

The release of the Consumer Price Index (CPI) report by the Bureau of Labor Statistics on Thursday is highly anticipated by the markets. This anticipation has been heightened due to the unexpected rise in the Producer Price Index (PPI) for September. The upcoming Federal Open Market Committee (FOMC) meeting scheduled for the end of October and beginning of November adds to the significance of the CPI report. However, market expectations for future interest rates remain unchanged, with a high probability of no rate change in the coming months. Economists predict that the September CPI report will show modest readings, with a decrease in the headline inflation rate from August and a monthly increase in CPI. Core inflation, which excludes energy and food, is also expected to decline. Goldman Sachs economists have a below-consensus projection for September’s CPI, citing a smaller increase in core CPI than expected. The reaction of the market to the previous inflation report in August was positive, with stock market indices in the green and stable long-term bond yields. Growth-linked sectors performed well during that time.