The market is looking for the September CPI to post a 3.1% year-on-year and 0.4% month-on-month reading, with core inflation expected at 3.1% YoY and 0.3% MoM. There is a roughly 95% probability priced in for a rate cut at the October Fed meeting, and a potential for another cut in December. The magnitude and timing will be dictated by the confirmation of these inflation prints.
Key point: The Fed already started its cutting cycle at the September 17, 2025 meeting — the current question is not if, but when and how quickly additional cuts will come, depending on the CPI.
What happens if the CPI is in line with expectations?
If the figure confirms 3.1% YoY and 0.4% MoM (core 3.1%/0.3%):
- High odds of a rate cut in October: The market will double down on the Fed staying on its easing path.
- USD: Likely moderate downside or consolidation; initial reaction is often muted if short-term yields don’t pop.
- Fixed income: Futures will price the rate-cut path more clearly; short-end curves flatten rather than invert further.
- Gold/safe-havens: Could find technical support as real rates ease.
What if CPI surprises to the upside?
If the reading clearly exceeds 3.1% YoY or 0.4% MoM:
- This likely won’t prompt renewed Fed tightening (hiking phase is over), but could slow or delay the cut timeline.
- Immediate market impact: USD could stage a technical bounce, short-end yields could spike, weighing on risk assets and gold.
- Net outcome: Rate cuts remain the base case, but with increased caution around the timing of a second cut (December or later).
What if CPI is weaker than expected?
If inflation prints below 3.1% YoY or 0.4% MoM:
- Confidence increases that the Fed keeps cutting as scheduled (October and likely again before year-end).
- USD: Higher probability of pronounced weakening.
- Bonds: Short-end yields drop, curve adjusts flatter.
- Risk assets/metals: Trading desks will tend to favor long positions on cyclicals and gold as macro hedges.
Oil and supply-side drivers
In September, low oil prices have eased the CPI’s energy component, resulting in milder inflation readings and reducing the odds of a supply-driven spike. However, other factors — such as tariffs, higher import costs, or new moves in crude — may continue to influence future inflation prints.
Trump tariffs
Trump’s tariffs have added fuel to U.S. inflation in 2025, driving up the cost of imports (technology, appliances, textiles) and causing direct price increases at the cash register. On top of higher basic goods costs, tariffs have also pushed up energy prices and wage pressures, hitting purchasing power and supply chains. The result is persistently elevated inflation, consumer weakness, and no clear progress on the trade deficit.
Practical conclusion and quick trader guide
Key point: The Fed has already started cutting. CPI won’t redefine “if” there are cuts, but will drive the cadence and speed.
- Base case: Print in line = October cut reinforced, high odds of another in December.
- Main risk: Data beats = Possible delay/slowdown, technical USD bounce, short-term yields up.
- Trading: Avoid early overexposure, wait for confirmation (H1/H4 closes), rely on technical levels for stop/target management.
