TRU The Rate Update · Inflation Forecast
Our independent September CPI and PPI forecast, how it compares with August and with Wall Street, and what it could mean for the 10-year Treasury and your mortgage rate.
Dan Frio · Monday, October 12, 2026 · Final forecast · CPI Wed Oct 14 & PPI Thu Oct 15, 7:30 a.m. CT
Headline CPI Year-over-year projection ≈3.6% +0.54% month over month · rounds to 0.5% · Aug +0.4% | Core CPI Year-over-year projection ≈2.5% +0.26% month over month · rounds to 0.3% · Aug +0.3% | Headline PPI Year-over-year projection ≈5.3% +0.51% month over month · rounds to 0.5% · Aug +0.4% | Core PPI* Year-over-year projection ≈4.8% +0.28% month over month · rounds to 0.3% · Aug +0.3% |
FINAL SEPTEMBER FORECAST · Annual figures are approximate TRU projections; monthly figures are seasonally adjusted. See the year-over-year section for methodology. *Core PPI = final demand less food, energy and trade services.
Jump to:Monthly forecast · Year over year · Why our forecast · Mortgage impact · Lock or float?
Today's published estimates put headline CPI at +0.6% and core CPI at +0.2%. Our headline call is cooler, but our +0.26% core call rounds to +0.3%—slightly hotter than the monthly core estimate. Our headline PPI forecast is close to the +0.5% estimate carried in our forecast worksheet. Mortgage rates are back above 7% and the 10-year Treasury is above 5%. This week's inflation reports land at a sensitive moment, and they could push rates either way.
We went through the CPI basket line by line, from gasoline and rent to used cars and airfares. Oil and fuel prices jumped in September, so headline inflation should run hot. Underlying inflation looks steadier, but our final core CPI number of 0.26% sits right on the line between a reported 0.2% and 0.3%. That one decimal could decide how the bond market reacts on Wednesday.
| Measure | August actual | Economists (consensus) | Cleveland Fed nowcast | Our forecast |
|---|---|---|---|---|
| Headline CPI | +0.4% | +0.6% | +0.53% | +0.54% |
| Core CPI | +0.3% | +0.2% | +0.20% | +0.26% |
| Headline PPI | +0.4% | +0.5% | n/a | +0.51% |
| Core PPI* | +0.3% | Not comparable‡ | n/a | +0.28% |
Updated Oct. 12: Reuters and the Wall Street Journal poll cited by MarketWatch show headline CPI +0.6% and core CPI +0.2% monthly. Annual headline estimates differ by source: Reuters 3.7%; Barron's 3.6%. Both show core CPI 2.5% annually. Cleveland Fed nowcasts shown here are updated Oct. 9. ‡The +0.3% core PPI consensus excludes food and energy; our +0.28% excludes food, energy AND trade services. These are different measures.
Monthly inflation tells us what changed since August. Year-over-year inflation compares September 2026 with September 2025. Our annual projections below extend the monthly forecast; they are approximate, not additional official results.
| Annual inflation measure | August actual | September economist estimate | TRU September projection |
|---|---|---|---|
| Headline CPI | 3.4% | 3.6–3.7% | ≈3.6% |
| Core CPI (less food & energy) | 2.4% | 2.5% | ≈2.5% |
| Headline PPI | 5.4% | Not verified | ≈5.3%* |
| PPI less food, energy & trade services | 4.7% | Not verified for this measure | ≈4.8%* |
CPI: we anchor to the Cleveland Fed's September nowcasts of 3.60% headline and 2.39% core, then adjust for the difference between its monthly forecasts (0.53% / 0.20%) and ours (0.54% / 0.26%). This gives approximately 3.61% / 2.45%, presented as about 3.6% / 2.5%; core is near the rounding boundary. This assumes a comparable seasonal adjustment relationship and is not an exact unadjusted-index calculation.
*PPI: a base-effect approximation uses (1 + August annual rate) × (1 + our September monthly forecast) ÷ (1 + September 2025 monthly change) − 1. BLS's September 2025 monthly changes are 0.6% headline and 0.2% excluding food, energy and trade. The resulting approximations are 5.31% and 4.78%. Annual BLS figures use unadjusted indexes while these monthly inputs are seasonally adjusted, so exact published annual figures may differ. No verified September annual PPI consensus was found; none is invented here.
Comparing month-end prices understates what happened. WTI crude closed August at $87.03 and September at $97.18, up 11.7%. But inflation reports sample prices all month, and the September average was 16% above August's, with oil above $100 for most of mid-September.
WTI Aug avg $83.90 per barrel | WTI Sep avg $97.31 +16.0% vs Aug | Sep peak $107.02 September 15 | Pump price avg +7.1% $4.19 → $4.49/gal |
This was not just crude. Diesel, jet fuel, heating oil and gasoline all moved higher, which matters for both reports: gasoline feeds consumer prices directly, while diesel and jet fuel feed freight and airline costs.
September vs. August average wholesale price change
| Jet fuel (Gulf) | +17.8% | |
| Gasoline (LA) | +17.1% | |
| Diesel (NY) | +16.5% | |
| Heating oil (NY) | +16.2% | |
| Diesel (Gulf) | +16.1% | |
| WTI crude | +16.0% | |
| Gasoline (Gulf) | +12.3% | |
| Gasoline (NY) | +6.9% |
Bars scaled 0–20%. Source: EIA monthly petroleum spot prices, released Oct 7, 2026. These are wholesale prices, not the retail prices CPI measures. WTI peaked at $107.02 on Sept. 15; the one-day dip to $85.20 on Sept. 25 is included in the $97.31 monthly average.
Average pump prices rose about 7.1% from August to September, from $4.19 to $4.49 a gallon. A natural instinct is to shave that number down for seasonal adjustment. In September, the adjustment usually works the other way.
Gas prices normally ease after the summer driving season, so the government's seasonal factors expect a September decline. When prices rise instead, the seasonally adjusted increase tends to come out larger than the raw change. We now assume gasoline CPI rises about 7.5% after adjustment, adding roughly 0.28 percentage points to headline inflation by itself.
Estimated contribution to September headline CPI (percentage points)
| Gasoline | 0.28 | |
| Shelter | 0.09 | |
| Other core items | 0.06 | |
| Transport services | 0.04 | |
| Food | 0.03 | |
| Other energy | 0.03 | |
| Medical services | 0.01 | |
| Goods, net | 0.01 |
Bars scaled 0–0.30. Total ≈ 0.54%. "Goods, net" includes the used-car decline offsetting new vehicles, apparel and tobacco.
| CPI category | Weight | August | Our Sept. | Contribution (pp) |
|---|---|---|---|---|
| Food (groceries + restaurants) | 13.54% | +0.1% | +0.20% | 0.027 |
| Gasoline | 3.77% | +3.9% | +7.50% | 0.283 |
| Fuel oil & other motor fuels | 0.28% | +10.1% | +6–7% | 0.018 |
| Electricity | 2.55% | −0.2% | +0.20% | 0.005 |
| Natural gas utilities | 0.75% | −1.1% | +0.40% | 0.003 |
| Shelter | 35.34% | +0.3% | +0.25% | 0.088 |
| New vehicles | 3.76% | +0.3% | +0.10% | 0.004 |
| Used vehicles | 2.70% | +0.4% | −0.20% | −0.005 |
| Apparel | 2.41% | 0.0% | +0.20% | 0.005 |
| Medical goods | 1.40% | −0.2% | −0.10% | −0.001 |
| Medical services | 6.86% | −0.2% | +0.20% | 0.014 |
| Transportation services | 6.31% | +0.5% | +0.70% | 0.044 |
| Alcohol & tobacco | 1.27% | +0.1 / +0.6% | +0.20 / +0.40% | 0.003 |
| All other core items | 19.06% | — | +0.30% | 0.057 |
| Final headline CPI | 100% | +0.4% | +0.54% | 0.545 |
| Final core CPI | 79.11% | +0.3% | +0.26% | 0.209 ÷ 0.791 |
Weights are BLS relative importance (July 2026). Our model uses fixed weights, which approximates but does not exactly reproduce BLS aggregation.
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All other assumptions held at our final values. Gasoline moves headline CPI about 0.04 points per 1-point change; shelter moves core CPI about 0.045 points per 0.1-point change.
Shelter (+0.25%). Rent and owners' equivalent rent make up about 45% of core CPI. Zillow's September data points to cooling, but shelter was +0.3% in August and moves slowly. We split the difference. If shelter holds at +0.3%, core rounds to +0.3% with room to spare.
Airfares (transport services +0.7%). Jet fuel rose almost 18% in September, and airfares already jumped 2.7% in August. Falling auto insurance premiums are the main offset.
Used cars (−0.2%). Wholesale used-car prices fell 1.1% in September, but retail prices in CPI lag wholesale by about two months. Most of that drop should show up later this fall, so we keep the decline small.
Our call: our final core number is 0.26%, which BLS would report as 0.3%. A small miss in shelter or airfares could print 0.2%. The Cleveland Fed's nowcast sits at 0.20%, so core is the closest call of the week.
The PPI measures what businesses receive, not what consumers pay. Higher diesel and jet fuel feed directly into producer energy and freight costs. The ISM services survey also showed input-price pressure at its highest level since 2022.
| PPI component | Approx. weight | August | Our Sept. | Contribution (pp) |
|---|---|---|---|---|
| Final-demand energy | 5.5% | +4.2% | +6.0% | 0.330 |
| Final-demand food | 5.5% | +0.1% | +0.4% | 0.022 |
| Goods less food & energy | 20.0% | +0.4% | +0.3% | 0.060 |
| Trade-service margins | 20.0% | −0.2% | −0.2% | −0.040 |
| Transportation & warehousing | 4.5% | +2.3% | +1.0% | 0.045 |
| Other services | 42.5% | 0.0% | +0.2% | 0.085 |
| Construction | 2.0% | 0.0% | +0.2% | 0.004 |
| Final headline PPI | 100% | +0.4% | +0.51% | 0.506 |
| Final core PPI* | 69.0% | +0.3% | +0.28% | 0.194 ÷ 0.690 |
The swing factor is trade margins. When wholesale fuel spikes, gas stations and retailers often absorb part of it, which shrinks their margins and pulls headline PPI down. That offset is why our final headline PPI is 0.51% even though fuel costs alone suggest more. Confidence here is lower than for CPI. PPI weights are our approximate final-demand shares, not official BLS weights.
10-year Treasury 5.24% Close, Fri Oct 9 | 30-yr fixed (Freddie Mac) 7.40% Weekly avg, Oct 8 | Spread 2.16 points over the 10-year |
Mortgage rates are set through mortgage-backed securities pricing and often move with the 10-year Treasury, and the bond market reacts to the surprise, not the number itself. If inflation comes in close to expectations, rates may barely move. What matters most is whether core inflation, a key signal of underlying price pressure, beats or misses.
| Cooler Energy only Headline CPI +0.4% or lower, core +0.2%, PPI in line. Read: Gas was the story | Base case Our forecast Headline CPI 0.54%, core 0.26%, PPI 0.51% / 0.28%. Read: Mixed surprise risk | Hotter It's spreading Core CPI +0.4% or PPI +0.8% with core PPI +0.5%. Read: Broad inflation |
Scenarios describe likely direction, not predictions of specific yields. Actual market moves depend on expectations, revisions and other news.
The national average gas price fell from $4.60 on September 28 to $4.50 on October 5, a 2.3% drop. If that continues, October's inflation report could look much better than September's. Bond traders know this, which is one reason a hot headline number driven by gasoline alone may not do lasting damage.
| Core CPI prints | Headline CPI prints | What it likely means for rates |
|---|---|---|
| 0.2% | 0.4–0.5% | Better than expected. Energy was the story; the 10-year has room to ease. |
| 0.3% | 0.5% | Our rounded forecast. Cooler headline, hotter core than the 0.2% estimate; mortgage relief may be limited. |
| 0.3% | 0.6%+ | Hot headline from gasoline. Short-term pressure, but October gas prices are already falling. |
| 0.4%+ | Any | Inflation is spreading. Expect pressure on the 10-year and higher mortgage rates. |
Then on Thursday: a PPI near 0.5% with core near 0.3% confirms our read. PPI at 0.8% or core PPI at 0.5% would add to rate pressure.
Mon, Oct 12 Bond market closed Columbus Day. No Treasury trading, so lenders mostly carry Friday's pricing. | Wed, Oct 14 7:30 a.m. CT · CPI Watch core CPI first, then the gasoline index and shelter. | Thu, Oct 15 7:30 a.m. CT · PPI Watch energy, transportation and trade margins. |
LOCK Closing in the next 30 days? A hot core number is the bigger risk, so locking ahead of Wednesday limits the downside. | FLOAT Closing in 45+ days and comfortable with risk? Falling October gas prices give rates a path lower if core cooperates. | WATCH Still shopping? Set a rate target so you know the moment pricing moves in your favor. |
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How we built this forecast
Our CPI forecast combines categories covering 100% of the CPI basket using BLS relative-importance weights, with each category's September change estimated from EIA energy prices, Zillow rent data, Cox Automotive used-vehicle data, and August BLS results. The PPI estimate is a judgment-based forecast built from component trends and carries more uncertainty. These are independent forecasts, not official statistics, and actual results will differ.
Source check: Reuters CPI expectations, Oct. 12 · BLS August CPI · BLS August PPI · Cleveland Fed nowcast · BLS release schedule.
This article is for educational purposes and is not a commitment to lend or a guarantee of rates or terms. Rates and programs change and are subject to credit approval and lender guidelines.
Dan Frio | NMLS #246527 | PBT Bancorp | NMLS #257781
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