Nationwide Economic & Market Commentary

Oct. 15, 2026 | Kathy Bostjancic

CPI runs hot at the headline, and firm at the core – places pressure on the Fed to act

  • Total consumer prices, in line with expectations, jumped 0.6% in September, but the 0.3% rise in core CPI was firmer than the 0.2% forecast. This lifts the year-on-year overall inflation rate to 3.7% from 3.4% in August and the core CPI rate increased to 2.6% from 2.4%.
  • The faster pace of core CPI increases the odds for the Fed to possibly raise rates again in October, despite several key Fed officials - including NY Fed President Williams and Governors Waller, Bowman, and Jefferson - delivering unusually explicit guidance that indicated that they do not see a need for the Fed to raise rates in a rapid manner. Those comments had dramatically lowered the odds of an October rate hike from a high of 70% to 20% over the past few weeks - however, odds after today’s CPI print are rising closer to 50%, which seems more appropriate to us.
  • Our call has been for the Fed to follow up on the September tightening with consecutive rate hikes in October and December but then pause at that level in 2027. Inflation is running too hot compared to the Fed’s 2% target, economic activity is buoyant, and the renewed rise in energy prices risks spilling over to other goods and services beyond just the direct impact we have seen in airline fares that are up a sharp 22% from a year ago.
  • Notably, shelter costs posted a firm rise in September, resulting in an uptick in the annual pace of increase to 3.2% following an overall disinflation trend in place since March 2025. This is an important development since shelter represents 35% of the total CPI and 44% of core CPI. The upward pressure stems from increases in hotel and motel prices, and a firm rise in owners’ equivalent rent. It could be the high price of buying a home coupled with a rise in mortgage rates to 7.5% is keeping more households in the rental market that places upward pressure on rents.

 

Oct. 2, 2026 | Kathy Bostjancic

Employment gains cooled, but remain solid – might give Fed room to hike rates more slowly

  • Employment gains cooled in September (29,000 vs a revised 133,000 in August) and importantly wage growth slowed with the annual pace ticking down to 3% from 3.1% in August – indicating the labor market is not a source of inflation pressures. Given this is the last employment report before the next FOMC policy meeting on October 27 – 28, it lends support to the less hawkish Fed officials that indicate no need to rush and deliver the next rate hike at the end of this month. In turn, it reduces some upward pressure on bond yields in the near-term.
  • That said, Fed officials over the past two weeks have all indicated that more rate hikes are needed, but a few notable FOMC members – NY Fed President Williams and Vice Chair Jefferson – said the FOMC can be patient in delivering its next hike. It seems like it will be a ‘good family fight’ at the meeting, as Chair Warsh has described possible policy debates. From our vantage point, we expect higher gasoline prices to produce another hot headline CPI print fueling the more hawkish Fed officials to argue for another rate hike at the end of the month, albeit we estimate a more benign core CPI reading that would support those arguing for a slower pace of policy tightening. We see the Fed raising rates another 50bps this year, though if they skip tightening in October, we will then see rate hikes in December and likely January.
  • Despite the cooling in the September payroll count and net downward revisions to the prior two months, employment demand remains solid as the three-month average change in overall payrolls remains 51,000 and private payrolls are a touch stronger at 54,000 – both well above the 20,000 – 30,000 break-even month rate we estimate.
  • The unemployment rate rose a modest 0.1 percentage point (ppt) to 4.2% but remained very low and increased due to a rise in the labor force participation rate by 0.2 ppts not labor market weakness. Indeed, in the household survey the number of people employed rose a strong 406,000.