Natixis has released a research report stating that the U.S. September Consumer Price Index (CPI) data due this week will most likely meet market expectations, and the unusually high August inflation reading was merely a one-off anomaly. The bank's economists believe that the Federal Reserve Chair's current rate hike cycle may have already seen its only increase. This CPI preview report provides a complete scenario analysis of core inflation, the breadth of inflation, and the subsequent path of Federal Reserve monetary policy, while also noting that monthly inflation data naturally contains volatility noise, and policymakers will continue to track the changing trends of various inflation indicators.

September CPI Forecast: Core Inflation Moderates, Headline Rise Driven by Energy and Food

Economists Christopher Hodge and Selin Aker stated in Natixis's September CPI preview report, "We expect September core CPI to rise 0.19% month-over-month, with headline CPI up 0.6% month-over-month. The August CPI exceeding market consensus was mainly driven by short-term increases in certain components, and we judge this phenomenon will not repeat." The two economists believe that this core inflation reading will reflect the trend of inflation gradually returning to normal. They added, "If our forecast holds, core CPI year-over-year will remain unchanged at 2.4%; the 3-month annualized inflation rate will rise to 2.8%, as the low July data drops out of the statistical window; the 6-month annualized inflation rate will edge down to 2.55%." Natixis believes that the recent rise in headline inflation is mainly driven by energy and food prices and does not represent a broad re-acceleration of underlying inflation. The two economists stated, "Despite the back-and-forth, we still believe the breadth of inflation is improving, and various supply shocks will not broadly pass through to core goods and services prices."

Alternative Inflation Measures: Trend Improving but Not Yet at the 2% Target

Hodge and Aker also conducted analysis based on various alternative inflation indicators, which paint a relatively moderate inflation picture. They stated, "The concept of underlying inflation is frequently mentioned by Federal Reserve Chair Kevin Warsh, and this concept typically refers to core inflation, but Warsh has also mentioned alternative indicators such as trimmed mean inflation and median inflation." The economists noted, "Indicators compiled by several regional Federal Reserve banks show that the inflation trend has already improved, though it has not yet fallen back to the Fed's 2% target. The Fed's inflation task force will likely evaluate such alternative indicators to determine whether to give them greater weight in assessing inflation trends." Hodge and Aker added that Warsh also focuses on inflation breadth, counting the number of CPI components rising more than 3%, as inflation breadth is a very useful observation tool for monetary policymakers. This indicator can help policymakers determine whether price pressures are concentrated in only a few areas, whether problems in those areas can be resolved through monetary policy, and whether price pressures will spread across the entire inflation system. The report mentioned that inflation breadth reversed in the second half of 2025, with the implementation of "Liberation Day" tariff policies bringing notable disruption; the Iran conflict triggered an energy shock that also caused a temporary rise in price levels, representing a short-term increase from the supply side.

Fed Policy Path Scenarios: Hold in October, December Hike Option Retained

Turning to the short-term impact on Federal Reserve monetary policy, Hodge and Aker stated that the stronger August CPI data did not change their view that inflation is gradually declining, and they remain optimistic about inflation falling in the coming quarters. They stated, "In our view, the Fed will rely heavily on incoming economic data to adjust policy judgments, and subsequent inflation data will become the core guide for policy. If inflation data continues to improve, then the September hike may be the only one in this cycle. This situation is unusual, as typically once the Fed begins hiking, it will raise rates multiple times in succession to sufficiently suppress price pressures. But this is a special cycle, where the long-term disinflation trend has not been broken, only the pace of decline has fallen short of expectations, and policymakers believe a single small hike is enough to push inflation further down." The two economists expect the Fed to hold rates steady at its late-October policy meeting. They explained that pausing hikes would allow time to comprehensively assess various economic indicators at the December meeting; on the other hand, with midterm elections approaching in early November, the Fed also wants to avoid political controversy caused by a rate hike before the election.

Conclusion

The report concluded by emphasizing that the Fed's policy focus remains firmly on each inflation data release. As demonstrated by the previous CPI report, monthly data is quite noisy and it is difficult to get consistently improving readings in succession. Based on this risk, Natixis's base case still retains the possibility of another rate hike in December or January of the following year, as policymakers may believe a single small rate adjustment is enough to push inflation back toward target. Overall, the broad direction of disinflation remains unchanged, but supply disruptions and monthly data fluctuations mean the Fed will not completely shut the door on rate hikes.