Although the U.S. government is still in a shutdown, the Bureau of Labor Statistics (BLS), as a government agency, decided to release the September Consumer Price Index (CPI) report before the end of October. With the Federal Reserve's upcoming policy meeting next week, and the September employment data missing due to the shutdown, Friday's CPI report could be the only tool the Fed uses to assess the economic situation, making it the most-watched event on Wall Street.

“Because we haven't gotten any government data in the recent past, I think all of the market's focus and all of the market's attention is going to be directed onto this one report,” said Troy Ludtka, senior economist at SMBC Nikko Securities in the U.S. “This is going to be the report to end all reports.”

However, based on Wall Street's consensus, the CPI report from the BLS is expected to be more or less "status quo."

According to a Dow Jones survey of economists, the overall monthly CPI increase is expected to be 0.4%, the same as the previous month, bringing the 12-month inflation rate to 3.1%, a 0.2 percentage point increase from August. Core CPI, which excludes food and energy, is expected to rise 0.3%, with a year-on-year increase of 3.1%, the same as in August. The annual increase will be the highest since January.

The market's focus is on any deviations in the inflation data, especially whether inflation is higher or lower than expected. In particular, markets will continue to monitor the impact of President Trump's tariff policies on prices.

Lack of Clarity

Goldman Sachs economists expect little change in car prices, with insurance premiums rising and airfares dropping. On the tariff issue, Goldman expects certain categories, such as communications, household goods, and leisure products, to experience "upward pressure," but the impact on core inflation will be minimal, only increasing by 0.07 percentage points.

According to data from the BLS, grocery prices rose 0.6% in August, the highest monthly increase in nearly three years. Economists expect a more moderate increase in September, but some categories could still show significant price pressures.

For example, due to long-term droughts that have reduced cattle herds, beef prices have surged in recent years. Climate change has also limited the supply of cocoa and coffee, pushing their prices higher, with tariffs further exacerbating the pressure.

However, due to the government shutdown, data has become less transparent, and this has raised questions about the reliability of the CPI report.

“We don't have full clarity with the lack of important data points that the market depends on due to the government shutdown,” said Vishal Khanduja, Head of Broad Market Fixed Income at Morgan Stanley Investment Management.

Tariff Pressure Remains

Indeed, recent market volatility has made investors nervous, and geopolitical uncertainties, especially Trump's fluctuating tariff policies, have led to concerns that high prices may slow down robust economic growth. Michael Pugliese, a senior economist at Wells Fargo, warned in an interview that the last time U.S. inflation was below 2% was in February 2021.

“At the macro level, it's a reminder of how sticky inflation can be when it gets out of the tube and how hard it is to get back to that 2% once it's been above target for a while,” he said.

The latest CPI report, amid the "dilemma" of insufficient data due to the U.S. government shutdown, could at least help answer some of these questions.

BNP Paribas believes that the September CPI data is a ""key checkpoint to review our baseline," noting that the "risks for the September CPI release tilt to the downside," due to a slowdown in housing cost growth and limited tariff transmission effects. This will offset the seasonal strength in other service categories. The bank also stated that core CPI data "tend to be a touch weaker than consensus expectations in September."

However, BNP still expects more tariff impacts in the future, predicting that "more material pass-through taking place in September and extending into Q1 2026."

The bank pointed out, "companies have taken a relatively restrained approach to passing on tariffs, with consumers bearing just under 20% of costs," but it expects businesses to accelerate the transmission of tariff costs in Q3 and Q4 of 2025. By the end of Q1 2026, consumers are expected to bear most of the tariff costs.

“In terms of market impact, it would take a meaningful surprise to the upside for the market to change its mind about an additional interest rate cut,” said Julien Lafargue, Chief Market Strategist at Barclays Private Bank.

CPI Will Not Affect the Stock Market's Continued Rally?

In addition to the volatility from the trade war, the market has been supported by a strong earnings season. Economic data shows that despite various pressures, the economy remains resilient. According to the Atlanta Federal Reserve, GDP growth in Q3 was close to 4%.

While a major event is needed to shake this situation, an unexpected CPI report could be such an "event" that might trigger market volatility.

“I would expect volatility if the number comes in higher than expected,” said Stephanie Link, Chief Investment Strategist at Hightower Advisors. "However, I would view that as a buying opportunity as the economy is strong, the Fed is beginning a cutting cycle, EPS are growing double digits, and the fourth quarter is seasonally the strongest quarter of the year.”