In a market surprising announcement, the Consumer Price Index (CPI) came in above economist expectations this morning…
Consumer prices rose 3.7% annually in September as gas prices skyrocket
CNBC, October 14, 2026
But the issues go well beyond the headline numbers. The Federal Reserve Bank of Cleveland also released long-term estimates of expected inflation today, and it told an equally concerning story. Elevated inflation expectations are so firmly established that the public expects price pressures to remain above the Fed’s 2% target over the next decade! This is an important alarm bell for the Fed as entrenched expectations can make inflation significantly more difficult to bring/pull down.
However, in the latest Jobs Report, employment unexpectedly weakened as the number of jobs added dropped substantially.
September jobs report: hiring stalls, unemployment rises to 4.2%
Reuters, October 2, 2026
There’s also the added complexity of the upcoming midterm elections. The Fed has only hiked in the month prior to an election in 1978 and 2022 – both were midterms. In both instances, they were already in the midst of a multi-rate hiking cycle with the first increase occurring months earlier. The Fed has never conducted their second hike of a cycle in the month leading up to an election.
With these rapidly shifting dynamics, we’re keeping a close eye on the evolving monetary outlook. Consequently, we expect the Fed will stand down and will not hike rates at the upcoming FOMC meeting at the end of the month. However, the Fed’s tightrope walk still has much further to go.