(Reuters) -U.S. consumer prices increased as expected in October, and progress toward bringing inflation down has slowed since mid-year, which could result in fewer interest rate cuts from the Federal Reserve next year.
The consumer price index rose 0.2% for the fourth straight month, the Labor Department said on Wednesday. In the 12 months through October, the CPI advanced 2.6% after climbing 2.4% in September. The headline numbers were predicted by economists polled by Reuters. The up-tick in annual inflation also reflects last year’s low reading dropping out of the calculation.
CPI excluding food and energy increased 0.3% in October, rising by the same margin for the third consecutive month. In the 12 months through October, the so-called core CPI gained 3.3%. That followed a similar advance in September.
MARKET REACTION:
STOCKS: U.S. stock index futures turned 0.2% higher, pointing to a steady open on Wall Street BONDS: The 10-year U.S. Treasury yield fell to 4.378% and the two-year yield fell to 4.273%FOREX: The dollar index softened more, off 0.2% and the euro was up 0.16%, a bit firmer
COMMENTS:
ROBERT PAVLIK, SENIOR PORTFOLIO MANAGER AT DAKOTA WEALTH IN FAIRFIELD, CONNECTICUT
“The fact that CPI came in as expected relieved some concerns the market had going into the report. You’re seeing Treasury yields move down, which is positive and helping stock futures.”
“The in-line number is allowing the market to breathe a little easier and to focus more on the positives of less regulation, a potential increase in business.”
“I don’t think this report has any bearing on the December FOMC meeting and that’s what the market is reacting to as well. Right now, we’re on the glide path to another rate cut. It could get disrupted but right now it looks like we could get another rate cut.”
SEEMA SHAH, CHIEF GLOBAL STRATEGIST, PRINCIPAL ASSET MANAGEMENT (by email)
“Given nervousness around the more inflationary aspects of Trump’s policy proposals, markets appeared primed for an upside inflation surprise today. A hotter-than-expected inflation number could have convinced the Fed to stand pat at its next meeting so the in-line number can almost be considered as a beat. A December cut is still in the cards.
“Yet, with policymakers already so cautious about the risk of renewed price pressures, particularly amidst the continued strength of the U.S. economy and the potential Trump policy agenda, the Fed will need to tread a cautious path. The rising likelihood is that, come early 2025, rather than reducing policy rates at each meeting, the Fed is likely to slow its cutting pace to every other meeting.”
QUINCY KROSBY, CHIEF GLOBAL STRATEGIST, LPL FINANCIAL, CHARLOTTE, NORTH CAROLINA (by email)
“The CPI coming in as expected across all components triggered a sigh of relief from Treasuries as the ten-year yield inched lower.
“Equity futures edged higher, but with the equity market extended following days of strong performance, the focus was on Treasury yields as concerns over still stubborn inflation has dominated headlines.
“Still, the 2.6% year-over-year print, while expected, may keep the Fed mindful from declaring victory over its campaign to quell inflation.”
BRIAN JACOBSEN, CHIEF ECONOMIST, ANNEX WEALTH MANAGEMENT, MENOMONEE FALLS, WISCONSIN
“The numbers came in consistent with expectations, but under the hood there are signs of further improvement ahead. Durable goods prices are down 2.5% year-over-year. Nondurables are down 0.5%. Services inflation is still significantly positive, but it’s not accelerating any more. The inflation risks on the horizon from possible tariffs, deficits, or immigration changes are nebulous and uncertain enough to not be a major worry until we get more details about what might happen.”
(Compiled by the Global Finance & Markets Breaking News team)
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