Uncommon Friday CPI Release Could Influence Upcoming Fed Decision

For the first time since 2018, the US Consumer Price Index (CPI) will be released on a Friday, and it arrives under unique circumstances.

This Friday's September inflation report is pivotal, as a government shutdown has stalled most federal data releases, leaving the Federal Reserve with limited insights ahead of its crucial October 29 policy meeting.

CPI Report Becomes Crucial Amid Shutdown

With no other major reports, like jobs and retail sales data, expected until the shutdown concludes, the CPI data's timing—just five days before the Fed's meeting—is particularly significant.

“Something unusual is happening this week… Not only is it 5 days before the October 29th Fed meeting,” wrote Adam Kobeissi.

The CPI is generally released monthly by the Bureau of Labor Statistics (BLS), often on a Tuesday or Wednesday. The last Friday release was in January 2018. Typically, CPI data precedes Federal Open Market Committee (FOMC) meetings by 1–2 weeks, allowing policymakers to consider it alongside other economic indicators.

This unusual timing has sparked speculation about a bullish inflation figure, potentially setting the stage for a rate cut. The Fed's decision may now heavily rely on this single inflation reading.

With markets anticipating a 0.25% rate cut, investors are keen to see if softer CPI data could lead to a more substantial 0.5% reduction.

“Right now, there’s about a 99% probability of a 0.25% cut…If it comes in lower than expected, the chances of a 0.5% rate cut could increase,” one user remarked.

Inflation, Shutdown, and the Fed's Dilemma

Analysts surveyed by MarketWatch anticipate the September CPI report to show a continued rise in consumer prices, albeit at a slower pace than August, suggesting easing inflationary pressures.

The ongoing government shutdown complicates the situation, adding political and fiscal tensions that may influence the Fed's risk assessment.

Without updated labor and retail data, policymakers might depend on partial or outdated information to determine if inflation is slowing enough for continued easing. This Friday's release could be the only substantial data before the Fed's decision next week.

Meanwhile, Fed officials have expressed concern over a weakening labor market, supporting rate cuts. However, a higher-than-expected CPI could complicate matters, forcing the central bank to balance inflation risks against potential growth stagnation.