September U.S. CPI Inflation a Tad Lower Than Forecast; Preliminary October PMI Survey Results Out Too – Currency Thoughts
September U.S. CPI Inflation a Tad Lower Than Forecast; Preliminary October PMI Survey Results Out Too
October 24, 2025
Only a discernibly worse U.S. inflation report than anticipated was likely to dampen high expectations of a Federal Reserve interest rate cut next week, and that danger has been averted. Although up 0.1 percentage point to an 8-month high of 3.0% in September, total consumer price inflation was below the consensus forecast of 3.1%, and core inflation in fact slid back unexpectedly to a 3-month low of 3.0%. Inflation in service prices dropped 0.2 percentage points to a 4-year low of 3.6%, food costs decelerated 0.1 percentage point to a 3.1% year-on-year advance, and the rental component held steady at 3.6%. The main factor behind the acceleration of total CPI inflation from a 49-month low of 2.3% last April has been energy, which has swung from -3.7% then to +2.8% in September.
Prior to today’s 08:30 EDT release of U.S. consumer price figures, which had been delayed from the scheduled report at mid-month, the dollar had risen overnight by 0.3% against the yen and loonie, 0.2% relative to the Swiss franc and sterling, and 0.1% vis-a-vis the euro and Korean won. The ten-year U.S. Treasury yield was up a basis point, hedging against a bad surprise in today’s CPI report. Even larger increases in 10-year sovereign debt yields were experienced in Europe as European monetary officials continue to squelch hope that further rate cuts are coming anytime soon. In stock market action, gains were experienced in South Korea of 2.5%, Japan of 1.4% and China and Hong Kong, each of 0.7%. A 0.5% drop of the Paris CAC reflected uneasiness about the stability of the French government, and U.S. futures has experienced moderate advances prior to today’s opening bell. The prices of gold (+1.7%), oil (+0.6%) and Bitcoin (+0.9%) had increased.
For central bank watchers, the Bank of Russia’s policy interest rate was unexpectedly reduced by 50 basis points to 16.5%. The rate had been cut at each of the prior three reviews by a combined 400 basis points from 21% to 17%, and hopes of an early end to the war with Ukraine, which has been Russia’s main inflationary generator, have dissipated. Russian consumer price inflation had slowed from 10.3% in March to 8.0% six months later, but that remains double the 4% target and even further from a low of 2.3% touched in April 2023. A released statement notes,
The key proinflationary risks are associated with a longer upward deviation of the Russian economy from a balanced growth path and high inflation expectations, the effects of the VAT increase, as well as with the deterioration in the terms of external trade. A further decrease in the growth rate of the global economy and oil prices in case of escalating trade disputes may have proinflationary effects through the ruble exchange rate dynamics.
There also was a central bank policy review today at the the Central Bank of Uzbekistan, after which the key interest was kept steady at 14.0%, its level since a 50-basis point hike last March. The rate had been has high as 17% in the second quarter of 2022. CPI inflation in Uzbekistan printed at an 18-month low of 8.0% in September but still 3 percentage points above the medium-term target of 5.0%. Economic growth has been robust and projected to remain so.
Turning to today’s other data highlight,
Australia’s preliminary estimate from its composite purchasing managers survey covering all private sector activity rose 0.2 index points to a higher-than-expected 2-month peak of 52.6 in October. Japan‘s composite PMI fell 0.4 points to a 5-month low of 50.9. India’s composite PMI also dropped to a 5-month low but, at 59.9, still reflected a robust economy. The German composite PMI delivered a pleasant surprise, a 29-month high reading of 53.8. However, that news was offset by more bad news from France where both the composite PMI reading of 46.8 and the service sector index of 47.1 were at 8-month lows and deep in contractionary territory. The Euroland surveys produced only 2-month high composite and service sector readings of 52.2, a 14-month service sector high of 52.6, but a stagnant manufacturing score of 50.0. Sentiment about the future softened, but the reports also signaled somewhat higher inflationary pressure that surely will make ECB officials reluctant to cut interest rates soon.
The British composite and service sector PMI readings were each at a 2-month high of 51.1, and its manufacturing PMI jumped from 46.2 in September to a 1-year high of 49.6. A second piece of positive British economic news today involved an unexpected 0.5% rise in the volume of retail sales during September. Following a 0.6% increase in August, that resulted in a 0.9% advance for the third quarter as a whole and 1.5% increase between September 2024 and September 2025. Finally British consumer confidence rose two index points to a 2-month high of -17 this month.
Japanese total consumer price inflation accelerated last month to a 2-month high of 2.9% from 2.7% in August. Excluding fresh food, inflation likewise moved up 0.2 percentage points to 2.9%, while the 3.0% reading on the index excluding food and energy slowed to a 5-month low. Japan’s leading and coincident economic indices from August were each revised downward to 5- and 18-month lows, respectively.
Despite the aforementioned French PMI clunker reported today, a separate French release for consumer confidence showed a 2-index point improvement to a 5-month high. At 90, however, that’s still ten points below its long-term average.
Indices of Czech consumer sentiment and business confidence in October were at their highest levels in 68 and 40 months, respectively. Danish business confidence recovered only half a point to 92.5 in October after plunging 7.4 points in September.
Spanish producer price inflation rose to a 2-month high of just 0.3% last month. Icelandic producer price inflation climbed to a 4-month high of 3.1%. Swedish producer price inflation turned positive (albeit just +0.5%) after six sub-zero readings in a row. Finnish PPI inflation remained below zero at -0.3% in September.
Just in: An unexpected increase in the preliminary U.S. service sector PMI and by a full index point to 55.2 lifted the composite PMI to a 3-month high of 54.8. The manufacturing PMI only recovered 0.2 points to 52.2 after dropping a full point in September. A significant downward revision in the U. Michigan’s U.S. consumer sentiment index from 55.0 estimated initially to a 5-month low of 53.6 was also just reported. A small segment of the population at the high end of affluence has until recently kept U.S. personal consumption chugging along, but anecdotal evidence points to more difficult circumstances for the vaster majority even as sharply higher health costs loom.
Copyright 2025, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Central Bank of Russia, Central Bank of Uzbekistan, preliminary October 2025 PMI survey results, U.S. consumer prices
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