Is the disinflation trend stalling? The latest Consumer Price Index reading, which came in hotter than expected, and last week's blowout jobs report have cemented bets that the Federal Reserve will go for a 25-basis-point interest rate cut next month. Some even expect the central bank to pause.
The latest: The headline CPI rose +0.2% in September from the prior month, stronger than the +0.1% expected and flat with August's +0.2%, according to Bureau of Labor Statistics data released on Thursday. Shelter and food contributed the most to the overall increase, while gasoline prices fell substantially. Core CPI, which excludes food and energy, also stalled, rising +0.3% M/M vs. +0.2% expected and +0.3% prior. Separately, weekly jobless claims jumped more than expected, signaling some weakness in the labor market.
SA commentary: "Though it was a slightly disappointing report, to say September inflation marks a resurgence is likely an overstatement," said Seeking Alpha analyst Mike Zaccardi. "Rising food prices remain a sore point, and with prices continuing to increase globally, it's unlikely this trend will reverse course any time soon," said Justin Purohit. But he noted the promising moderation in the shelter category, which has been one of the stickiest categories of inflation over the past several years.
Fed outlook: Atlanta Fed President Raphael Bostic is "definitely open" to holding rates steady next month. "I think we have the ability to wait and let things play out a little longer... There are elements of the [CPI] report which I think validate that view," he said. "Given the strong labor market report, and two consecutive 0.3% core CPI prints, the Fed is likely to pause the easing campaign in November, which is not good news for the stock market," said SA analyst Damir Tokic. (108 comments)
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Today's Markets
In Asia, Japan +0.6%. Hong Kong closed. China -2.6%. India -0.3%.
In Europe, at midday, London -0.2%. Paris +0.1%. Frankfurt +0.1%.
Futures at 6:30, Dow -0.1%. S&P -0.1%. Nasdaq -0.2%. Crude -0.6% to $75.38. Gold +0.6% to $2,654.80. Bitcoin +0.2% to $61,190.
Ten-year Treasury Yield +3 bps to 4.10%.
Today's Economic Calendar
8:30 AM Producer Price Index
9:45 AM Fed’s Goolsbee: "Community Banking: Navigating a Change Landscape"
10:00 AM Consumer Sentiment
10:45 AM Fed's Logan Speech
1:00 PM Baker Hughes Rig Count
1:10 PM Fed's Bowman: "Community Banking: Navigating a Change Landscape"
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