Stock market outlook: Fed minutes put CPI in focus

NEW YORK — Equity investors begin the week with the Federal Reserve’s next move hanging on a single number. The September consumer price index is due Wednesday, October 14, at 8:30 a.m. Eastern, and the minutes of the central bank’s last meeting have already told markets what the committee wants to see. For anyone building a stock market outlook for the weeks ahead, the data and the minutes now point in the same direction.

What the minutes say

The Federal Open Market Committee met September 15 and 16 and raised the federal funds target range by a quarter point, to 3.75% to 4%, effective September 17. The vote was 12-0. Interest on reserve balances moved to 3.90%, and the primary credit rate to 4%.

The minutes record that most participants judged another increase would likely be appropriate by the end of the year, while stressing that future decisions would depend on incoming information. They also said they had not seen sufficient progress on lowering inflation in recent months. In the same document, staff reported that total PCE inflation edged up to 3.8% in August on a 12-month basis, with core PCE at 3.4%. Staff projected inflation returning to 2% in 2029.

On the labor side, the unemployment rate stood at 4.1% in July and August. Participants described the labor market as stable and close to maximum employment, which leaves the inflation numbers as the swing factor.

What the last CPI showed

The Bureau of Labor Statistics reported that consumer prices rose 0.4% in August on a seasonally adjusted basis and 3.4% over the 12 months ending in August. Excluding food and energy, prices rose 0.3% for the month and 2.4% over the year.

Wednesday’s report covers September. Benzinga’s market preview put the consensus expectation for the headline annual rate at 3.6%, up from 3.4%. Energy has been a main source of pressure: crude oil rose again on Monday, with WTI near $94 a barrel and Brent near $107, according to the same preview.

Why equities care

A higher-than-expected print would strengthen the case for the year-end increase the minutes describe and could press on shares that are priced for growth. Monday’s session already showed a market sensitive to valuations, with technology the weakest sector while financials gained. A softer reading would not change the committee’s stated bias but could ease the pressure on timing.

The Fed’s next meeting is scheduled for October 27 and 28, which means the CPI report, retail sales and the first round of bank earnings all arrive before the committee meets again.

What to watch

Look first at core inflation on Wednesday, since the committee has framed progress in those terms. After that, watch whether Fed officials speaking this week repeat the year-end language from the minutes or soften it.