Daily newsletter · Thu 1 Oct 2026
Inflation came in cooler than expected and the bond market took no notice
Prices rose 3.4% over the year to August on the measure the Federal Reserve watches. Economists had expected about 3.7%. Core prices, which leave out food and energy, held at 3.0% and rose 0.2% in the month against a 0.3% forecast.
Some of that improvement is new arithmetic. The Bureau of Economic Analysis has changed how it prices legal services, computer software and portfolio management. July's core reading has since been revised down to 3.0% from the 3.3% first reported.
Energy did what the war in Iran was always going to make it do. Petrol prices rose 4.4% over the month and energy goods and services 2.3%.
Wall Street liked the headline for about four hours. The S&P 500 was up 0.58% by late morning and closed 0.25% lower at 7,651.54. The Dow gave up 443.87 points, or 0.86%.
The 10-year Treasury yield went the other way, rising to 5.29%, the most it has paid since 2007. Traders still cut the odds of a quarter-point rise on 27-28 October to about a third, from roughly 70% on Tuesday.
one softer month does not settle this, and some of it came from a change of method rather than cheaper goods. I'd want a second month at 3.0%, on both methods, before calling it a trend.
More in
All stories →- Wednesday 11 November October's inflation report put a half-point rate rise back on the table
- Saturday 7 November America added 165,000 jobs in October, and the bond market heard a December rate rise
- Wednesday 4 November The Reserve Bank of Australia raised rates to a level Australians have not seen since 2008
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