US core inflation data to signal direction for rates

By the Editorial Team · Monday, October 12, 2026

The U.S. Bureau of Labor Statistics will release September inflation data showing a slight rise in both headline and core inflation, which is expected to influence the Federal Reserve’s interest rate actions for the rest of the year. Despite higher inflation mainly driven by sustained energy prices, most analysts predict the Fed will hold rates steady in October, with a possible increase in December.

Data on US consumer inflation due this week is expected to influence Federal Reserve interest rate decisions for the remainder of the year. The Bureau of Labor Statistics is set to release September inflation figures on Wednesday, with economists forecasting a rise in headline inflation to 3.7 percent from 3.4 percent in August. The core inflation measure, which excludes food and energy prices, is anticipated to inch up slightly to 2.5 percent from 2.4 percent.

Energy prices, sustained by geopolitical tensions such as the ongoing conflict involving Iran, have remained elevated, supporting persistent inflation pressures. Brent crude oil has stayed above $100 per barrel throughout September, contributing significantly to the headline inflation increase. This situation led the Fed to raise interest rates at its September meeting, as inflation remained stickier than expected.

Despite the projected modest increase in core inflation, most analysts believe it will not be enough to justify additional rate hikes in the near term. Several Federal Reserve officials have indicated a cautious stance. Governor Chris Waller recently stated that while further rate increases may be necessary, the central bank retains flexibility regarding their timing. Economists at Citi wrote that a small uptick in September’s core inflation would likely reinforce the decision to keep rates steady in October and potentially December, emphasizing that inflation appears to be slowing gradually.

Market expectations reflect this view, with traders assigning only a 19 percent probability to a rate hike at October’s Fed meeting. A quarter-point increase in December is more firmly priced in by the market.

In the United Kingdom, investors are awaiting August GDP data, scheduled for release Thursday, to gauge the resilience of economic activity amid elevated energy costs and rising borrowing expenses. Economists predict GDP to remain flat in August following a 0.4 percent expansion in July, which was partly driven by temporary factors such as increased spending during the World Cup and in sectors like hospitality. The Office for National Statistics will also revise monthly GDP estimates for earlier months in 2026.

Signs of continued economic strength could support expectations for a 25 basis point interest rate increase by the Bank of England in November. Even if a slight contraction occurs in August, analysts suggest that the broader pattern of resilience would persist, despite the Middle East war entering its eighth month and continuing to pressure energy prices and financing costs.

Economic growth averaged 0.5 percent in the first half of the year and is believed to have continued at a similar pace through the third quarter, according to Thomas Pugh, chief economist at RSM UK. Nevertheless, he cautioned that the outlook beyond summer is uncertain, with inflation expected to rise from 3.1 percent in August to around 4.5 percent early next year. Rising unemployment and mortgage costs are likely to strain household budgets, while political uncertainty ahead of the October 28 Budget could further curb economic activity in the final months of 2026. These factors suggest the UK economy might slow notably by the end of the year and into 2027.

This article was reported by synthesizing coverage from multiple independent news outlets to present a balanced, unbiased account. Read about our editorial standards. Spotted an error? Let us know.