US: Troubling core CPI in September – UOB Group
|In the latest CPI inflation print (released on 10 October), US CPI inflation was coming in a tad hotter than expectations, UOB Group’s economist Alvin Liew notes.
Headline and core CPI above expectations in September
“US CPI inflation was a tad hotter than expectations as headline CPI rose by 0.2% m/m, 2.4% y/y in Sep (August: 0.1% m/m, 2.5% y/y). Despite the miss, it was still the slowest since Feb 2021. But core CPI continued to accelerate as it rose by 0.3% m/m (same pace as August) while compared to 12 months ago, it picked up pace to 3.3% y/y (August: 3.2%). Shelter and food costs were key factors driving headline CPI, offsetting the decline in energy costs, while core services inflation accelerated on a plethora of items, including pricier non-housing services.”
“We still expect US inflation to ease but admittedly near-term challenges are clearly present. We keep our headline CPI forecast to average lower at 2.9% in 2024 (compared to the 4.1% recorded in 2023). While core inflation may also ease, it is now likely to average 3.4% in 2024 (from previous forecast of 3.3%). It is still a significant moderation from the 4.8% average in 2023 but remains well above the Fed’s 2% objective. Our 2025 headline inflation and core forecast are both now at 2.0%.”
“September’s jumbo 50 bps of rate cut increasingly looked to be oneoff and Fed likely to continue to ease but at a gradual pace. The not-so-cool September core CPI certainly dialed back those more aggressive expectations of Fed rate cuts but it probably was not hot enough to grind the Fed to a pause. If anything, it will imply gradualism for the Fed in its pace of easing. We still expect the Fed to continue the rate cut cycle in the remaining meetings this year, with 50-bps cuts for the remainder of 2024 (i.e. two 25-bps cuts, one each in November 24 and December 24 FOMC).”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.