Article Image

IPFS News Link • Inflation

CPI Preview: Inflation Is Cooling But Will It Be Enough

• by Tyler Durden

Analysts expect headline consumer prices to pick up by 0.6% M/M in October, accelerating from the 0.4% M/M rate in September while the core measure is seen cooling to 0.5% M/M, lower than the 0.6% M/M in September, but a still elevated level vs historical levels.

On an annual basis, headline CPI is expected to rise 7.9%, down from 8.2% last month; core CPI sill also slow to 6.5% from 6.6%.

The data will be framed in the context of how much progress the Fed is making towards lowering inflation. After the November FOMC meeting, Fed Chair Powell said it was "very premature" to consider pausing or ending the rate hiking cycle, noting that inflation remains well above the Fed's longer-run goals, with price pressures evident across goods and services. Although longer-term inflation expectations still appear well-anchored, the Fed wants to see inflation coming down decisively, and is prepared to stay the course until the job is done.

As a reminder, the message from Powell last week was that the Fed is strongly committed to its inflation target of 2%. Powell did, however, allude to a potentially slower pace of rate hikes in December - the statement said the Fed will consider the "cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments" when determining the pace of future rate increases. Analysts rationalised that with rates in restrictive territory, the Fed can downshift to a slower pace of normalization to assess the impact of the 375bps worth of rate tightening unleashed since March.