Flatline?
The latest US CPI inflation data was presented to markets yesterday. Based on the significant position and price adjustments we have seen following the US election earlier this month, October price data was seen as a critical statistic. Following an outperformance of the Republican Party at the polls and a 25-basis point cut from the Federal Reserve, this data point could have served as an afront or the missing link for the current trend in markets.
Ultimately, October CPI recorded in line with consensus forecasts for headline annual inflation. Published at 2.6%, this represents an as expected growth from September’s 2.4% reading. As we know, the Fed continues to take an almost exclusive fascination with services inflation. Stripping out more volatile elements of price change such as food and energy prices, markets also received an update on core CPI yesterday. Here, a green light to the dominant market trade could be found.
Core CPI came in hot for October, registering a 0.3% month-on-month gain. Higher inflation is consistent with one consequence of so-called Trump trades that have dominated market flow since the US election. Playing second fiddle to the headline index it is also noted that regional inflationary pressures are becoming increasingly divergent. In theory this could limit the Fed’s ability to act. However, in such a political environment as is expected come 2025, it could be unlikely to force an anchor upon the Fed.
Discussion and Analysis by Charles Porter
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