The upside surprise in producer prices in September was driven in part by the components that feed directly through to the core PCE deflator, with our estimate now pointing to a 0.35% m/m gain. That makes an October rate hike a bit more likely, with the FOMC’s decision coming down to developments in broader financial conditions in the next couple of weeks and whether Fed officials are happier to surprise the market under Chair Kevin Warsh than has typically been the case.
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