With the government shutdown creating a vacuum of official economic data, Wall Street’s attention is fixed on Friday’s release of the September consumer price index, elevating its potential to be a significant market-moving event. While the headline figures are expected to align with recent trends, even a minor deviation from forecasts could have an outsized impact.
“Because we haven’t gotten any government data in the recent past, the market’s entire focus and attention is going to be directed onto this one report,” said Troy Ludtka, senior U.S. economist at SMBC Nikko Securities. “This is going to be the report to end all reports.”
According to a Dow Jones survey of economists, the consensus forecast is for the all-items index to rise by 0.4%, matching last month’s pace. This would bring the 12-month inflation rate to 3.1%, an increase of 0.2 percentage points from August. Core CPI, which excludes volatile food and energy prices, is projected to show a 0.3% monthly and 3.1% annual increase, both unchanged from the previous report. The yearly core rate would be at its highest level since January.
Investors will be closely watching for any signs that inflation is running hotter or colder than anticipated, with a particular focus on the impact of President Donald Trump’s tariffs on prices.
The report, delayed from its original October 15 release, represents the final significant economic data point before the Federal Reserve’s policy meeting concludes next Wednesday. The Bureau of Labor Statistics recalled workers to publish the data, which serves as a critical benchmark for Social Security cost-of-living adjustments.
However, the lack of other supporting government data has raised questions about clarity and reliability. “We don’t have full clear clarity with the lack of important data points that the market depends on due to the government shutdown,” said Vishal Khanduja, head of broad markets fixed income at Morgan Stanley Investment Management. “So that adds to the uncertainty a little bit more.”
Goldman Sachs economists expect little change in auto prices, an increase in car insurance, and a decline in airfare. The firm also noted it anticipates “upward pressure” from tariffs on categories like communication and household furnishings but estimates this will add only 0.07 percentage points to the core inflation figure.
The heightened uncertainty comes as investors navigate a volatile market, with major averages hovering near record highs. Geopolitical tensions, particularly the shifting tariff landscape, have fueled concerns that rising prices could impede an otherwise strong pace of economic growth. The CPI report, despite potential data disruptions, is expected to provide crucial insights for both the market and the Federal Reserve, which is widely expected to approve another quarter-percentage-point interest rate cut.
“It would take a meaningful surprise to the upside for the market to change its mind about an additional interest rate cut,” said Julien Lafargue, chief market strategist at Barclays Private Bank.
Outside of the trade conflict, markets have been supported by a strong earnings season and surprisingly resilient economic data. Prior to the shutdown, the Atlanta Fed’s model was tracking third-quarter GDP growth near 4%. While it would take a significant event to shift this narrative, a surprise in the CPI data could be the catalyst.
“I would expect volatility if the number comes in higher than expected,” said Stephanie Link, chief investment strategist at Hightower Advisors. “I would view that as a buying opportunity as the economy is strong, the Fed is beginning a cutting cycle, EPS are growing double digits and the fourth quarter is seasonally the strongest quarter of the year.”
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