Federal reserve building, Washington DC

While the latest U.S. inflation numbers came in much higher than expected this week, it appears that inflation expectations are still moderate, says BMO Capital Markets.

In a new report, the bank’s economists said that the latest University of Michigan consumer sentiment index for September rose to its highest level since the spring, marking the third straight increase.

As part of the index reading, inflation expectations continued to slide, to their lowest level “in about a year,” BMO said.

Since the U.S. Federal Reserve began aggressively hiking interest rates, “perceptions of higher prices have calmed,” the report noted.

As a result, the bank said that the reading “more or less silences” calls for the Fed to hike rates by 100 basis points next week.

“For BMO Economics, we are sticking with 75 bps,” it said.

In a separate report, BMO also said that it expects the Fed to take its overnight rate to between 3.75% and 4.0% to cool inflation.