Data Preview & Forecast
MUFG forecasts October 2026 headline CPI at 0.29% MoM and core CPI at 0.23% MoM, in line with the median estimate from Bloomberg contributors.
Risks tilted to a stronger core CPI: Since 2022, monthly core inflation readings of less than 0.15% have been uncommon. A strong reversal in OER after last month’s unusual strength can help produce a softer inflation print in October, but more items would need significant disinflation for core CPI to come in below 0.2% MoM. Instead, elevated shipping costs and reinstituted tariffs may accelerate the MoM contribution from core goods, offsetting some of the improvement in OER. Meanwhile, airline fares, lodging and recreational services prices are expected to apply upward pressure on October’s core CPI, tilting the risks toward a stronger print.
Market Thoughts
Base-case: To partially stop last week’s “flight to safety” UST rally, a very strong October NFP was needed. We think the bar is high to trigger a rates selloff as markets are now focused on the benefits of lower oil prices and they might be less sensitive to the October CPI (viewing it as old news). With fed funds futures still showing a hike in December, we doubt markets move much on a 0.2% MoM reading.
Stronger risk: Last month’s stronger than expected core CPI wasn’t enough to trigger a lasting sell-off, and this month may be the same. Fragility in the equity market will continue to dominate the narrative.
Weaker risk: A 0.1% MoM core reading would ease December hiking odds closer to our 55-60% expectations of a hike.
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