October 16, 2026
Consumer and producer price gains outpaced forecasts in September, as higher fuel costs tied to the conflict with Iran spread from the pump through the wider economy. New York Federal Reserve (Fed) President John Williams said Tuesday that one more rate increase this year may still be appropriate, though he expects inflation to slow “quite a bit” over the coming 12 months. After Wednesday’s CPI release, Chicago Fed President Austan Goolsbee called the figures “discouraging” but said he favored waiting for more data.
The consumer price index (CPI) for September rose 0.6% monthly and 3.7% over 12 months, the highest since May, as gasoline jumped 9.1%. Core CPI, excluding food and energy, advanced 0.3% and 2.6%, a tenth above consensus on both. Producer prices climbed 1.3%, more than double the forecast, and 6.3% annually, the fastest since 2022. Retail sales gained 0.8%, while the control group used for GDP edged up 0.1%. Prices outpacing underlying sales suggest households paying more for fuel are spending less elsewhere, as the Fed’s Beige Book also found.
The Artificial intelligence (AI) and chip stock selloff, as well as the global haven buying of bonds outweighed the higher than expected reports on inflation especially for longer dated treasuries. As of this writing, the 10-year Treasury yield is 5.08%, down 16 basis points, on the week, and the 2-year is 4.73%, down 6 basis points. The S&P 500 is at approximately 7,714, a 1.24% weekly loss, after Wednesday’s steepest drop since July. West Texas Intermediate crude rose 6.80% to $98.10 a barrel amid Middle East attacks, including a Houthi strike on Aramco’s headquarters.
The Chandler team expects at least one more quarter-point increase this year, with December still more likely than October. Energy costs argue for acting, but softer spending and tighter credit for AI borrowers give the Fed room to wait. The median call in a Bloomberg survey of fifty-eight economists is no change on October 28. At a speech Friday morning in Bangkok, Fed Chair Kevin Warsh refrained from signaling another rate hike this month and reiterated his opposition to the Fed’s use of forward guidance. In these volatile markets, the Chandler team continues to manage client portfolios with an emphasis on high credit quality, ample liquidity, and disciplined duration management.
Next Week: Housing Starts, Building Permits, Initial Jobless Claims, Continuing Claims, Leading Index (LEI), S&P Global U.S. Composite US Manufacturing PMI, S&P Global US Services PMI, University of Michigan Consumer Sentiment (final)
Written by Scott Prickett, CTP, Co-Chief Investment Officer