Will recent US CPI data be welcomed by Fed policymakers?

The US consumer price inflation looks to have negatively surprised the consensus. Economists still predict that the Fed will hold interest rates steady until June 2024, when they will start to cut them. In other words, October saw a decrease in inflationary pressures.

With fuel prices acting as a major drag on inflation this month, consumer price inflation surprised analysts by coming in flat MoM in October, down from 0.4% in September.

With a 0.2% MoM print, prices in the core segment also performed far worse than expected. Because good prices were generally weaker in October, the CPI’s “supercore” slowed to 0.2% MoM, its lowest pace in three months.

Fed Officials should be relieved by today’s CPI report, which shows that while output has been increasing steadily, price pressures have been decreasing. This should give the Fed more leeway to wait for the economy to stabilize and grow at a slower rate.

Our long-held belief that the Fed is probably done raising rates is further supported by the data released today. As a result, we still expect to see the first rate cut in June 2024.