September's Consumer Price Index came in at 3.2% — welcome progress after the summer stall — but still more than a percentage point above the Federal Reserve's 2% inflation target (which is measured by PCE, not CPI). The October report, due on 13 November, will tell us whether that downward momentum is holding.
Three things to watch
1. Shelter: Housing costs — rent and owners' equivalent rent (OER) — account for roughly one third of the CPI basket. At 4.9% in September, shelter is the single largest contributor to above-target inflation. The BLS explains that OER reflects what homeowners would theoretically pay to rent their own home. Because leases turn over slowly, shelter CPI lags real-time rent indices by roughly 12–18 months. Private-market rent trackers like the Zillow Observed Rent Index and Apartments.com have been flat to negative year-on-year since mid-2023, suggesting shelter CPI will continue drifting lower into 2027.
2. Supercore (services ex-shelter): The Fed pays close attention to "supercore" inflation — core services excluding shelter — because it correlates most closely with labour costs and domestic demand. In September it ran at 3.0%, down from 3.2% in August. A further decline would signal that the last-mile problem is easing.
3. Energy base effects: A year ago, energy prices were elevated. In October 2025, oil averaged roughly $88/barrel. If October 2026 oil remains near current levels (~$72/barrel), the year-on-year comparison will mechanically drag headline inflation lower — even without any new price falls. This base effect could shave 0.3–0.4 percentage points off headline CPI.
What the data means for Fed policy
The FOMC meets on 5 November — before the October CPI is released — so October's print will inform the December meeting on 17 December. Markets are currently pricing a roughly 60% probability of a December cut, according to CME FedWatch. A soft October reading (headline below 3.0%, core below 2.5%) would likely push that probability higher. The October PCE data from the BEA — the Fed's actual target measure — follows two weeks later, on 26 November.