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Published: Oct 13, 2022 4 min read

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Trader works on the floor of the New York Stock Exchange (NYSE) on October 07, 2022 in New York City
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The latest inflation data is in from the Bureau of Labor Statistics, and it's not good news for investors.

The consumer price index (CPI) — a measure of what consumers are paying for goods and services — rose 0.4% in September and is up 8.2% from a year ago. That's higher than economists were expecting. And while the report shows inflation eased slightly last month, it still remains stubbornly high. Core CPI, which excludes food and energy prices, jumped 6.6% from a year ago, the biggest 12-month gain in 40 years.

Stocks fell Thursday morning on the news, and then later recovered as investors took in what the latest inflation data means for the Federal Reserve and their portfolios.

Rollercoaster-like moves in the stock market aren't new for investors this year. The S&P 500, a benchmark commonly used to measure how U.S. stocks are doing overall, fell into a bear market in June and — despite a summer rally — is now down around 24% for the year.

Here's what investors need to know.

What September inflation numbers mean for the stock market

The fact that inflation is still high is not what the Federal Reserve was hoping for. The central bank has been raising interest rates in an effort to bring down those high prices and cool the economy. In September, the Fed raised rates by three-quarters of a percentage point, and minutes released on Wednesday from that meeting indicate that it expects higher rates to stick around until prices come down.

The Fed's next meeting is scheduled for the first week of November — and investors will be watching closely. That's because while higher interest rates can help curb prices at the grocery store and gas pump, they also tend to bring down prices of financial assets like stocks, bonds and crypto.

The inflation data combined with a stronger-than-projected September jobs report "should cement the Fed’s plans for a 75 basis point hike at their next meeting at the start of November," Sam Millette, fixed income strategist for Commonwealth Financial Network, said via written commentary shared with Money.

What's next for investors?

Even if Thursday's inflation data had come in lower than expected, a Fed pivot from its current policy would have been unlikely, Mark Haefele, chief investment officer at UBS Global Wealth Management wrote in a research note ahead of the inflation report Thursday.

"A single month of positive CPI data would not move the needle for the Fed," he added.

John Blank, chief equity strategist and economist at Zacks Investment Research, said in written commentary shared with Money that — taking into account solely the Fed's inflation concerns — he doubts the Fed will pivot until the middle of next year. (Though he says "a major bond market crisis could force the Fed’s hand.")

Until there is more certainty that prices are coming down and the Fed changes course, experts are warning of continued ups and downs in the markets.

"We expect the markets to remain volatile in the coming months," Haefele wrote. Millette agrees that investors should expect "more short term volatility."

So remain calm and remember that market downturns are normal — and they certainly don't last forever.

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