Data Preview & Forecast
MUFG forecasts September 2026 headline CPI at 0.52% MoM (3.6% YoY) and core CPI at 0.19% MoM (2.4% YoY), in line with the median estimate from Bloomberg contributors.
What to watch out for: Inflation momentum of core goods will broadly be maintained, driven by reimposed tariffs and rising import/energy prices, though deflation of used autos will offset. Notably, inflation of wireless telephone services should normalize in September after contributing a historically high 0.08% points to last month’s CPI (pushing core CPI growth to 0.3% MoM in August compared to expectations of 0.2% MoM). Additionally, inflation of lodging away from home (i.e., hotels) should fall, though a slight acceleration in rents and OER will likely offset.
Market Thoughts
Base-case: Rounding will be a key driver of market reaction, with a 0.24% unrounded core feeling very different from a 0.15%. An initial rally is expected, led by the 2yr, but the composition will determine if it extends well past 8:30 or if it fades (widespread vs narrow set of items). The September PPI will be especially relevant to gauge PCE.
Upside risk: A core reading of 0.3% would keep rates under pressure and push hiking expectations for the Oct FOMC meeting towards 30%. We look for an initial bear flattening bias.
Downside risk: A 0.1% MoM core reading would quell expectations of a Fed hike in Oct, prompting a bull steepening move.
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