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Today’s Consumer Price Index report on inflation had just enough bad news on inflation to keep one more interest rate increases from the Federal Reserve on the table for 2023.

The all items CPI inflation rate rose 0.4% in September from August. That was slightly above the 0.3% monthly rate that economists had expected.

The core rate, which excludes more volatile food and fuel prices, rose by 0.3% in the month, as expected by economists. The bad news in the core number is that the month to month rate of increase at 0.3% recently isn’t low enough to bring inflation down to the Fed’s 2% target.

The annual all items CPI inflation rate was at 3.7%, slightly above the annual rate in August of 3.6%. The core annual inflation rate was 4.1%, the same annual rate as in August.

The bad news was in something called the Super Core rate, which the Fed has been watching very carefully lately. The Super Core rate looks at service sector prices excluding shelter. (The Fed has been watching this number lately because while goods inflation is falling services inflation has been stubborn.) The super core rate picked up steam in September, with a 0.6% monthly gain that was the biggest in a year. On an annual basis, the rate dipped to 3.91%, down from over 4% in August.

The financial markets concluded that the numbers favor a higher-for-longer policy at the Fed with maybe one more rate increase in 2023 but with no rate cuts until the second half of 2024. The result would be just two interest rate cuts in 2024 rather than the four cuts Wall Street had projected back in January.

Treasuries slumped on the bigger-than-expected headline increase in CPI, sending two-year Treasury yields up about 8 basis points by 9:30 a.m. in New York and 10-year yields up over five basis points. As of 10:30 a.m. New York time, the yield on the 10-year Treasury was up 8 basis points to 4.64%.

The CME FedWatch tool, which calculates the odds of a Fed interest rate move based on prices in the Fed Funds Future market, as of 10:30 in New York was showing 90% odds of the Fed holding rates steady at its November 1 meeting. That was essentially unchanged from yesterday’s 90.9% reading. Th CPI numbers did shift the odds on a December 13 move with the odds that the Fed would hold rates steady at the last meeting in 2023 falling to 59.9% from 71.8% yesterday.