CPI strengthens hawkish argument in Fed inflation war

US September CPI strengthens hawkish argument in Fed inflation war

Consumer prices in the United States rose more than anticipated in September, and underlying inflation pressures were increasing, which raised hopes that the Federal Reserve will raise interest rates by another 75 basis points next month.

The Labor Department said on Thursday that the consumer price index increased by 0.4% in September after increasing by 0.1% in August. Reuters polled economists, and they predicted a 0.2% increase in the CPI.

Consumer prices in the United States rose more than anticipated in September, and underlying inflation pressures were increasing, which raised hopes that the Federal Reserve will raise interest rates by another 75 basis points next month.

The Labor Department said on Thursday that the consumer price index increased by 0.4% in September after increasing by 0.1% in August. Reuters polled economists, and they predicted a 0.2% increase in the CPI.

After increasing by 8.3% in August, the CPI grew by 8.2% for the preceding twelve months to September. The annual CPI increased the most since November 1981, reaching a peak of 9.1% in June. read on to learn more

Market response:

STOCKS: S&P 500 futures declined substantially, falling 2.0%.

BONDS: The yield on 10-year Treasury notes increased by 12.4 basis points to a 14-year high of 4.026%; the yield on two-year U.S. Treasury notes increased by 18.3 basis points to a 15-year high of 4.470%.

The head of ALAN B. LANCZ & Associates in Toledo, Ohio is Alan Lancz.

“CPI was underwhelming. “With these CPI statistics we’re nearly back to the end of the second-quarter mid-summer mentality that maybe we haven’t seen the worst, and that maybe it’s not something that could be temporary,” said one investor who was hoped to get a little control over inflation.

MACE M. MCCAIN, FROST INVESTMENT ADVISORS, LLC’s President, Managing Director, and Chief Investment Officer

“Both the headline and core CPI numbers came in substantially higher than anticipated, which is unfortunate. We had hoped to see some easing in inflation, but as of right now, we are not. There just isn’t anything the Fed can do to change its course.”

They might be getting ahead of themselves because monetary policy takes into account the lag. I don’t believe that anything will stop them from continuing their course at this point, though, given the sentiment that the Fed governors have been expressing.”

BMO Capital Markets’ IAN LYNGEN, HEAD OF US RATES STRATEGY

“As news of the likely reversal of some elements of the UK’s fiscal plan hit the public, the market was heavily bid prior to the release of the data, with 10-year rates falling below 3.85%. The market reaction to the data has more than undone that advance, and from here we’ll be looking for a breach of 4% to put a larger downtrade to 4.103% as the next support. While there will undoubtedly be discussion about the possibility of a 100 bp climb, this print solidifies a 75 bp increase in November, making the more pertinent topic of whether Dec’s and Feb’s hikes will be increased more important.

KEN BOCA RATON, FLORIDA’S KACE CAPITAL ADVISORS, MANAGING PARTNER POLCARI

“Hello, the market is crashing. Why is anyone shocked, I ask myself? The Fed clearly placed us in this situation; they should have been more aggressive months ago, but they weren’t, and now they will likely be forced out in December to likely go another 75 basis points. It is not responding. Because of the oil price increase of 22% this month, which will be reflected in the November CPI and PPI next month, the CPI and PPI will once again rear their obnoxious heads even higher.

“I don’t think it is working right now because they are too late to the game, and it is not working because inflation is entrenching itself.”

LAFFER TENGLER INVESTMENTS, LAFFER JR., PRESIDENT, NASHVILLE, TENNESSEE

“Those are substantial sums. The Fed will increase by 75 basis points next month, and I wouldn’t be shocked if it increased by 50 or 75 basis points again in December.”

“Even while it might not become statistically apparent until the first quarter, in essence, a recession is beginning this quarter. To predict it, all you need to do is look at housing stock prices. The Fed won’t be able to cease hiking rates until after the end of the year with a 3.5% unemployment rate.”

“Right now, anyone who suggests that the Fed could turn is wishing on a star. Right now, the Fed needs to control inflation. The more they hike rates, the more a soft landing seems like wishful thinking. The fourth quarter will be extremely weak, perhaps even negative.”

“For better or worse, legacy is a big concern for central bankers. Everyone aspires to be someone, but nobody wants to be Arthur Burns. According to Paul Volker and J. Powell, slowing the economy and bringing inflation under control would be considerably more painful than not doing so for a year or two. Because he doesn’t want a repeat of the inflation of the 1970s, I believe he will err on the side of hiking rates too high and slowing the economy more than he probably would otherwise. They are concerned about liquidity, but have a look at what the BoJ’s intervention and the BoE’s intervention cost the yen.”

Senior investment strategist Brian Jacobsen works at Allspring Global Investments in Menomonie, Wisconsin.

“That inflation news undoubtedly sapped the energy from the room. Deflation in both durable and nondurable goods was what we had anticipated. According to the BLS’s method of calculation, shelter is primarily responsible for driving inflation upward. This makes it a badly lagging indicator. Perhaps the Fed will discuss “super core” inflation, which does not include food, energy, or shelter, rather than core inflation.

Senior portfolio manager Robert Pavlik works for Dakota Wealth in Fairfield, Connecticut.

“Data came in hotter than anticipated, which is rather disappointing for the market as a whole. It is stating that the inflation situation is still out of control. Most likely, the Federal Reserve will maintain its tempo of rate rises. The market had anticipated a pivot in the short term, but none has materialized.”

Chief Market Strategist at the Carson Group in Omaha, Ryan Detrick

This is another another discouraging indication that inflation will remain stubbornly high. Consequently, the Fed is free to maintain its extremely hawkish position. This comes right after the producer level inflation we saw yesterday, which surprised everyone by coming in hotter than predicted, demonstrating how the overall inflation landscape is still underwhelming on the upside.

“The anticipation of a pivot is on hold. The pivot is currently on hold, but there are still two more CPI prints before the December meeting with the Fed. Unfortunately, the numbers at this time do not indicate that inflation will begin to decline more quickly, therefore we must continue to wait.

The figures show that prices are rising overall and across the board, which is disappointing and indicates that the Fed will have plenty of room to maintain its hawkish stance. And that’s not good for the market.

“October has a reputation for being fairly unpredictable historically. We are now concentrating on the results season to see how strong corporate America and the consumer are. Although there is no doubt that inflation is a concern, the next issue is how the economy is doing. And what the entire corporate world has to say about the ongoing price increases and how they are affecting prospective consumption. In order to obtain those hints, this earnings season will be crucial.


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