The Federal Reserve

The US PPI rose 1.3% in September, the biggest monthly rise since March 2022, as energy jumped 10.8%. Core producer prices rose 0.7%, and Fed hike odds rose.

US CPI for September is out today. Here is what a hot, in-line or soft report would mean for the odds of a Fed rate rise in October or December, and for yields.

The Fed minutes show most officials expect another rate rise by the end of 2026. Since then, inflation and hiring came in softer, but long yields kept rising.

The 10-year Treasury yield rose 11bp in the week, to its highest Friday close since 2002, even as weak jobs data cut the odds of a Fed rise. Real yields did it.

Hiring fell short of forecasts and the two months before were revised down by 60,000. Futures now give a Fed increase on 28 October about a one-in-five chance. Two-year yields fell 7bp.

Core PCE prices rose 0.2% in August, less than forecast, and revisions lowered the path. Futures now give an October increase about a 35% chance, down from 71% on Monday.

The first increase since 2023 took the target range to 3.75% to 4%. The median official expects another quarter point before the end of the year.

Short yields moved first as the Fed turned to rate increases. The gap between 10-year and 2-year yields fell to 20bp, the smallest since March 2025.