Consumer prices in the US rose 0.2% in September compared to August, excluding energy and food by 0.3%. This is one tenth more than expected in each case. The data does not argue against further interest rate cuts by the Federal Reserve at its next meeting in November and beyond. But the big step of 50 basis points in September will probably remain an exception, point out Commerzbank analysts Dr. Christoph Balz and Bernd Weidensteiner.
The new decline in inflation appears to have stalled
“Better-than-expected labor market data for September has already removed the basis for speculation about a possible new big rate cut by the Fed. Now, the new decline in inflation also appears to have stalled. For the second month consecutively, the consumer price index has surprised with a fairly strong increase in the underlying rate.”
“This is not reflected one-to-one in the personal consumption expenditure (PCE) deflator, the Fed’s preferred measure of inflation. Some prices have risen very sharply for which the PCE deflator uses a different data source or are significantly lower weighted in the PCE deflator.”
“However, optimism regarding a continued easing of price pressure could be tempered somewhat. The data environment therefore also argues for a cautious approach by the Fed. Therefore, no will make another large rate cut of 50 basis points. And even a small 25 bp move may no longer be a foregone conclusion in the eyes of market participants. However, we maintain our forecast for a 25 bp cut in the rate. November meeting. After all, the decline in service prices has continued. These will also set the direction in the medium term.”
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
