Breaking News: CPI Data for September Expected to Show Continued Moderation in Price Pressures, Impact on Fed Interest Rate Cuts
As the release of the consumer price index (CPI) data for September approaches, analysts are anticipating that price pressures will continue to moderate at the end of the third quarter. This data, following Friday's strong jobs report, is likely to influence expectations surrounding the size and pace of Federal Reserve interest rate cuts in the upcoming months.
Additionally, producer price data set to be released on Friday is also expected to indicate tamer inflation. Analysts at UBS have stated that they do not believe the inflation print will hinder additional Fed borrowing cost reductions this year, following a significant 50-basis point drawdown by the central bank last month.
Looking ahead, UBS analysts predict that with inflation slowing, there will likely be 50 basis points of Fed easing in the final two meetings of 2024, and a further 100 basis points of cuts in 2025. However, they caution that the pace of these cuts could change depending on the trajectory of inflation or the labor market's performance.
After a robust US employment report last week, the likelihood of another large rate cut has significantly decreased. According to the CME Group's FedWatch Tool, there is now a 94.5% probability that the Fed will opt for a more traditional quarter percentage point cut, with a 5.5% chance of leaving borrowing costs unchanged.
The US economy added a remarkable 254,000 jobs last month, surpassing economists' expectations. The unemployment rate also dipped to 4.1%, while average hourly wages saw a 0.4% increase on a monthly basis.
Despite concerns over geopolitical tensions in the Middle East, major indices like the 30-stock achieved a record closing high on Friday. The tech-heavy and the benchmark also saw gains, contributing to a fourth consecutive positive week for the markets.
In conclusion, the data and analysis suggest that the economy is showing signs of resilience and growth, with potential implications for future Fed decisions and market performance. It is important for investors to stay informed and consider these factors when making financial decisions.