Inflation rose more than expected last month – dampening expectations for another big interest rate cut by the Federal Reserve next month.
The Labor Department said Thursday the consumer price index rose 2.4% in September from a year earlier — above the 2.3% rise expected by economists.
Month-on-month, the CPI rose 0.2% – a 0.1% increase more than economists expected, but also in line with the 0.2% number from August.
“Core” inflation – a metric closely watched by economists, which excludes volatile costs of food and energy, rose 3.3% from a year earlier, beating economists’ forecast of a 3.2% year-on-year rise. Is further than.
There was a fear of fall in shares due to this news in early trading.
Whereas Inflation remains above the Fed’s 2% target On an annual basis, the central bank nevertheless cut interest rates while focusing on the labor market, Which had shown signs of weakening before the latest jobs report.
The Bureau of Labor Statistics released a report last week indicating that employers added 254,000 jobs to their payrolls in September – significantly more than the 150,000 jobs analysts had predicted.
For the Fed, last week’s stronger-than-expected jobs report raised some concerns that the economy may not cool enough to slow inflation enough.
The central bank cut its key rate by half a point last month, It is the first rate cut of any size in four years.
Fed policymakers also indicated they envision two additional quarter-point rate cuts in November and December.
The unemployment rate fell one notch to 4.1% last month from 4.2% in August, according to the BLS.
The government also reported that the economy expanded at a solid annual rate of 3% in the April-June quarter.
And the growth rate is likely to continue at almost the same pace in the recently concluded July-September quarter.
The stronger-than-expected jobs report led analysts to predict the Fed would make a more modest cut of 25 basis points in November rather than another “jumbo” cut of 50 basis points.
“We think the stakes are high for the Fed to not cut rates at all in November,” said Citi economist Veronica Clark. it wrote in a note to customers on Monday.
“Ultimately, we expect the authorities to cut rates by 50bp in December, following a smaller 25bp cut in November, against a backdrop of still low inflation and the re-emergence of weak labor market trends over the next few months.”
Stephanie Roth, chief economist at Wolfe Research, agreed, saying a 50 basis point cut for November is “off the table.”
He He told CNBC that his estimate was Thursday’s CPI “should be supportive” of a 25 basis point cut next month.
with post wires
