An unwelcome inflation surprise

US core inflation hit a four-decade high last month, which, to be clear, is the opposite of what Jerome Powell & Friends need to prove their plan to cool the economy and achieve a “soft landing” is working. 

Driving the news: The core measure of the consumer price index–which excludes volatile energy and food prices–surged by 6.6% year-over-year last month, up from 6.3% in August.

Why it’s happening: A strong labour market, rising wages, and growing corporate profits in the US have led to a lot of money floating about in the economy…some would say too much.

  • Mark Hamrick, senior economic analyst at Bankrate told CNBC that higher than expected inflation numbers are a “tremendously unwelcome negative surprise.” 

Why it matters: Stubbornly high inflation means the Fed will likely deliver a fourth 0.75 percentage point rate hike… and when it comes to monetary policy, Canada tends to follow closely behind.

Zoom out: Central banks are already struggling to keep up with the US’ aggressive approach (and protect their currencies against a rising US dollar), which is hurting global markets and—according to a growing number of analysts—risks a worldwide recession.