Live Coverage: Fed and markets await core inflation with angst

Will US inflation remain elevated? Investors are worried about the CPI – which is critical for the Fed decision. Another 0.3% read on core CPI may cause jitters in markets. Live coverage.

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Core CPI hit 0.3% three times in a row

The Federal Reserve (Fed) targets core inflation, which excludes volatile items such as energy and food. Through interest rates, the central bank has more influence on underlying prices, such as those of housing and services – driven by wages.

The core Consumer Price Index (core CPI) rose by 0.3% in each of the past three reports, reflecting an annualized increase of 3.6%. That is significantly above the Fed's 2% goal. While the bank prefers another inflation gauge called Personal Consumption Expenditure (PCE), which is lower, any increase in CPI and its components is then reflected in PCE.

The economic calendar points to a repeat of the 0.3% increase in core CPI MoM, which would be worrying for markets. While it would leave the Fed on course to slash rates by 25 bps next week, its forecasts for 2025 would likely be more depressed.

A lower outcome of 0.2% would be a blessing for Stocks and Gold, while weighing on the US Dollar.

In case core CPI comes out at 0.3% – and especially higher – equities and the precious metal would suffer, while the Greenback would rise.

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