Hot CPI fuels Fed hike bets, sinks Kospi and Nikkei

US inflation picked up more than expected in September. The report put a Federal Reserve rate increase at the Oct. 27-28 meeting back in play, lifted the dollar to its highest level since May 2025 and set off a sell-off in technology stocks that spread from Wall Street to Asia.

The Consumer Price Index rose 0.6% in September and 3.7% from a year earlier, up from 3.4% in August, Reuters reported. Economists had expected 3.6%. Core CPI, which excludes food and energy, rose 0.3% for the month and 2.6% for the year. Analysts had forecast a 0.2% monthly gain, according to Bloomberg. Gasoline made up more than half of the monthly increase, driven by energy costs tied to the Iran war, AFP reported.reuters.com+2

Markets reprice the Fed

The CME Group's ↗ 1.52% FedWatch tool put the chance of an October hike as high as 51.5% after the release, up from about 22% before it, The Korea Herald reported. Those odds later eased to about 37%, AFP said. The Fed raised rates by a quarter point in September to a range of 3.75% to 4%.france24.com+1

The Bloomberg Dollar Spot Index climbed to its highest level since May 2025. The dollar was on track for a fifth straight weekly gain, Bloomberg reported. Treasury yields rose sharply, and the 10-year yield reached a fresh 24-year high, according to AFP.mercury.bloomberg.com+1

On Wall Street, the Nasdaq Composite and S&P 500 fell on Wednesday, while the Dow Jones Industrial Average ended nearly flat. Tech companies that borrow to fund AI spending led the losses. On Thursday, Seoul's Kospi dropped more than 7% and Tokyo's Nikkei 225 lost more than 4%. SK hynix ↘ 6.58% and SoftBank were among the hardest hit, AFP reported.france24.com

"This CPI report is a headache for the Fed, which had been indicating a willingness to pause this month," Neil Wilson of Saxo Markets told AFP.france24.com

Fed officials weigh in

Chicago Fed President Austan Goolsbee said in a Yahoo Finance interview that he found the report "discouraging," Bloomberg reported. He said services inflation showed price pressures were not limited to tariffs or the war, and he warned that the AI data-center buildout may be overheating the economy. "You must prevent the build up of overheating," he said.syndication.washingtonpost.com

San Francisco Fed President Mary Daly told Reuters that more rate hikes will likely be needed but that she sees no need to move this month, The Korea Herald reported. "I don't feel the urgency to adjust rates with only limited information," Daly said. "We have the time we need."biz.heraldcorp.com

Most officials have pointed to December rather than October as the more likely time for the next hike, according to InvestingLive. The October decision is due on Oct. 28, a week before the US midterm elections.investinglive.com