September Inflation Runs Hot At 8.2%, Sending Stocks Spiraling Lower: What You Need To Know

The SPDR S&P 500 SPY turned negative premarket Thursday after the Labor Department reported an 8.2% year-over-year increase in the consumer price index for September, a potential sign that the Fed will continue to be aggressive in its fight against runaway inflation.

What Happened: According to data from the U.S. Bureau of Labor Statistics, the headline CPI rose 8.2% in September, down from 8.3% in August. The September CPI reading came in above average economist estimates of 8.1%. 

On a month-over-month basis, CPI was up 0.4% versus average economist estimates for a 0.2% jump.

Core inflation, which excludes volatile food and energy prices, was up 6.6% in September, above average economist estimates for a 6.5% gain.

The Labor Department said gasoline prices fell 4.9% month-over-month in September. Energy prices were down 2.1% and food prices climbed 0.8%.

Why It Matters: Thursday's highly anticipated CPI inflation reading comes on the heels of a hot producer price index (PPI) report, showing PPI increased 0.4% in September, which was above average economist estimates for a 0.2% gain. PPI measures prices at the wholesale level while CPI measures the prices that consumers pay.

The Federal Reserve will be paying close attention to this week's data as it attempts to tame the highest inflation in more than 40 years. With the CPI data showing that inflation remains elevated, the Fed is more likely to remain aggressive with continued rate hikes.

Last month, the Fed raised its benchmark rate by 0.75% for the third straight time, bringing the target fed funds rate up to a new range between 3% and 3.25%, the highest levels seen since before the 2008 financial crisis.

According to FOMC minutes from the Fed's September meeting, Fed officials were surprised at the pace of inflation last month. The central bank indicated that it expects to keep higher interest rates in place until prices start to fall.

"In discussing potential policy actions at upcoming meetings, participants continued to anticipate that ongoing increases in the target range for the federal funds rate would be appropriate to achieve the Committee's objectives," the minutes stated.

"Participants judged that the Committee needed to move to, and then maintain, a more restrictive policy stance in order to meet the Committee’s legislative mandate to promote maximum employment and price stability."

SPY Price Action: The SPY was down 1.71% at $350.48 Thursday morning, according to Benzinga Pro.

Live reaction on Premarket Prep with @Spus & @MoneyMitchBZ

Is the fed having any effect on #inflation? pic.twitter.com/b1PQsQ9ezi

— Benzinga (@Benzinga) October 13, 2022

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