Institutions Release Preview Report on US September CPI, Suggesting Only One Rate Hike in the Current Cycle, Possibly in September

Huitong Net, October 12—— Christopher Hodge and Selin Aker, economists at Natixis, published a forward-looking report predicting that the US core CPI for September will rise by 0.19% month-over-month, while the headline CPI will increase by 0.6% month-over-month. The high inflation in August was a one-off disturbance, and the breadth of inflation is gradually improving. The bank believes the Federal Reserve will keep rates unchanged at the October meeting. This rate hike cycle may only include one increase in September, but options for another hike in December or January next year remain on the table, as monthly inflation volatility is still the main policy uncertainty.

Natixis released a research report indicating that the US September Consumer Price Index (CPI) to be announced this week will most likely meet market expectations, and the unusually high inflation data in August was just a one-time anomaly. The bank’s economists judge that the Federal Reserve Chair may have finished the only rate hike in this cycle.

This forward-looking CPI report provides a complete scenario analysis of core inflation, the extent of inflation diffusion, and the subsequent Fed monetary policy path, while also highlighting the inherent volatility and noise in monthly inflation data, explaining that policymakers will continue to track changes in various inflation indicators.

September CPI Forecast: Mild Recovery in Core Inflation, Headline Increase Driven by Energy and Food

Economists Christopher Hodge and Selin Aker stated in the Natixis September CPI preview report, “We August’s CPI exceeded consensus expectations mainly due to sharp short-term increases in certain components, which we believe will not be repeated.”

The two economists believe that this round of core inflation data reflects a gradual return of inflation to normal. They added, “If our predictions are correct, the year-on-year core CPI will hold steady at 2.4%; the three-month annualized inflation rate will rise to 2.8% as the low July reading falls out of the calculation window; the six-month annualized inflation will edge down to 2.55%.”

Natixis believes that The two economists stated, “Despite some back-and-forth in the process, we still see improvement in the spread of inflation. Various supply shocks will not broadly transmit to core goods and service prices.”

Diverse Inflation Metrics: Trend Improving but Not Yet at 2% Target

Hodge and Aker also analyzed multiple alternative inflation indicators, which paint a relatively mild inflation picture. They noted, “The concept of underlying inflation, often referenced by Fed Chair Kevin Warsh, generally refers to core inflation, though Warsh has also mentioned alternative measures like trimmed mean and median inflation.”

The economists pointed out, “Various regional Fed compiled indicators show that the inflation trend is improving but has not fallen back to the Federal Reserve's 2% target. The Fed’s inflation task force is likely to evaluate these alternative metrics to determine whether to give them more weight in future inflation outlooks.”

Hodge and Aker added that Warsh also pays attention to the breadth of inflation, calculating the number of CPI components rising by more than 3%. Inflation diffusion is a very practical tool for monetary policy decision-makers. This metric helps decision-makers judge whether price pressures are only concentrated in a few areas, whether these issues can be handled by monetary policy, and whether pressures will eventually spread throughout the inflation system. The report mentions that inflation diffusion reversed in the second half of 2025, with the “Liberation Day” tariffs policy implementation causing significant disturbances; the Iran conflict also prompted an energy shock, leading to a temporary price spike driven by the supply side.

Fed Policy Path Projection: No Rate Change in October, Hike Option Preserved for December

On the short-term impact of Fed monetary policy, Hodge and Aker said that although August CPI data was strong, their view of a gradual inflation decline remains intact, and they still expect inflation to fall in the coming quarters.

They stated, “In our view, the Federal Reserve will highly depend on new economic data to adjust its policy stance, and subsequent inflation releases will serve as the core policy guide. This scenario is relatively rare. Typically, after starting a tightening cycle, the Fed hikes multiple times to firmly suppress price pressures. But .”

The two economists foresee the Federal Reserve keeping rates unchanged at the late October FOMC meeting. They explain that pausing rate hikes leaves room for a comprehensive evaluation of economic indicators at the December meeting, and with the midterm elections approaching in early November, the Fed also hopes to avoid any political controversy from raising rates ahead of the vote.

Conclusion

The report concludes that the Fed's policy focus remains firmly on each month's published inflation data. As shown in the last CPI release, monthly data are noisy and rarely show a consistent positive run. Given this risk, Natixis’ baseline scenario continues to keep open the possibility of another rate hike in December or January next year; policymakers may believe that a single small rate adjustment is enough to help guide inflation back to target. Overall, the direction of inflation easing remains unchanged, but ongoing supply shocks and monthly data volatility mean the Federal Reserve will not completely close the door to further rate hikes.