U.S. overall inflation slowed in September but remained above expectations, according to data released on Thursday, suggesting a pause in the recent easing of price pressures. This could provide reason for the Federal Reserve to slow the pace of interest rate cuts.

The annual rate of unadjusted CPI in the United States in September fell from 2.5% in the previous month to 2.4%, marking the sixth consecutive month of decline and hitting a new low since February 2021, but higher than the market expectation of 2.3%. The annual rate of unadjusted core CPI in the United States in September was 3.3%, the highest since June, higher than the market expectation of 3.2%. The month-on-month growth rates of overall CPI and core CPI in September were 0.2% and 0.3%, respectively, both consistent with the previous value and exceeding expectations.

At the same time, the number of initial jobless claims in the United States for the week ending October 5 was 258,000, higher than the expected 230,000 and the previous value of 225,000, the highest since the week of August 5, 2023. This may be affected by factors such as hurricanes.

After the release of the US CPI data, the market fluctuated violently, with the short-term fluctuation of spot gold reaching $17, setting a new intraday high. The US dollar index once touched the 103 mark, and is currently the same as before the non-agricultural data, with a 15-minute amplitude of nearly 50 points.

U.S. short-term interest rate futures rose after the inflation data. Traders began to exit bets that the Federal Reserve will pause its rate cuts in November and increased bets on a quarter-point cut.

Analyst Enda Curran pointed out that it was expected that housing would put upward pressure on inflation, but the food sector also seemed to play a role. The housing index rose 0.2% in September and the food index rose 0.4%. Together, these two indexes contributed more than 75% of the increase in all items.

Analyst Cameron Crise said that at first glance, the CPI figures are indeed high, because both the month-on-month and year-on-year increases in both the overall and core CPI exceeded expectations. The increase in core prices is not just a matter of rounding, as it rose 0.312% in the month. Super core service prices rose 0.4% in the month, the fastest increase since April.

However, hidden in the background was a sharp rise in initial jobless claims, which increased by 258,000 in the week ended October 5. This appears to be due to Hurricane Helene. The market's reaction to the unemployment claims data is understandable, but perhaps a bit untimely given the temporary drivers. Then again, given the recent market movements, perhaps investors will always try to buy today.

Institutional analysis pointed out that although the US CPI growth in September was slightly higher than expected, the annual inflation rate was the smallest in more than three and a half years, which may cause the Federal Reserve to continue to cut interest rates next month.

Analyst Chris Anstey believes that the slightly better-than-expected CPI report adds to the case for a 25 basis point rate cut next month instead of a 50 basis point cut.

Pepperstone analyst Michael Brown said that although the US inflation data was higher than expected, the September CPI data seems unlikely to materially change the FOMC's policy outlook. He pointed out:

“Despite a stronger-than-expected September jobs report, and given continued disinflationary progress, 25 basis point rate cuts are expected at each of the remaining 2 FOMC meetings this year, a pace that is likely to continue through 2025 until the federal funds rate returns roughly to a neutral level of around 3% next summer. Essentially, this is the ‘Fed put’ that persists in a powerful and flexible form and continues to provide participants with the confidence to move further out of the risk curve, while also keeping equity market declines relatively shallow and viewed as buying opportunities.”

Analyst Joseph believes that the focus is on consumer spending data, so next week's retail sales report will be critical to the outlook for Treasury yields for the rest of the month.

Continuously updating...

The article is forwarded from: Jinshi Data