The acceleration in consumer prices (CPI) and producer prices (PPI) in September points to a pickup in core inflation as measured by the personal consumption expenditures (PCE) price index, the Federal Reserve's preferred gauge, to around 0.3% month-on-month for September. This should heighten concerns among members of the Federal Open Market Committee (FOMC), without challenging our baseline scenario of a pause. In September, Fed Chair Kevin Warsh stressed the importance of underlying trends over one-off fluctuations in the data.
What we expect
- The FOMC is expected to keep the target range for the federal funds rate at 3.75%–4.00%. The breakdown of the vote will be closely watched, following September's unanimous decision to raise rates, which bolstered Kevin Warsh's credibility.
- The statement is likely to change little from September: solid growth, a stable labor market with no wage pressures, elevated inflation and a reaffirmed commitment to price stability.
- At the press conference, Chair Warsh is expected to stick to his approach of offering no guidance on the future path of rates.
Conclusion
The Fed should maintain a hawkish tone despite leaving rates unchanged. Risks to inflation remain tilted to the upside, driven by geopolitical tensions and strong AI-related investment, which is fueling demand and US growth.
Source: Bloomberg, figures as at end-September 2026.
Completed 26/10/2026. This commentary is provided for information purposes only. The opinions expressed by Crédit Mutuel Asset Management are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. The information contained in this publication is based on sources we believe to be reliable. However, we do not guarantee its accuracy, completeness, validity, or relevance. Published by La Française Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. Crédit Mutuel Asset Management: 128 Boulevard Raspail, 75006 Paris is an asset management company approved by the Autorité des marchés financiers under n° GP 97 138 and registered with ORIAS (www.orias.fr) under no. 25003045 since 11/04/2025. Public Limited Company (Société Anonyme) with share capital of €3,871,680, RCS Paris n° 388 555 021, Crédit Mutuel Asset Management is a subsidiary of Groupe La Française, the asset management holding company of Crédit Mutuel Alliance Fédérale.
