šŗšø US inflation delivered an unpleasant surprise in October. Consumer prices rose more slowly than in September, but both headline and core CPI exceeded economistsā forecasts, raising fresh concerns about persistent inflationary pressure.
š The Numbers That Moved Expectations:
š“ Headline CPI: +0.4% MoM (forecast +0.3%, previousĀ +0.6%)
š“ Core CPI: +0.3% MoM (forecast +0.2%, previousĀ +0.3%)
Both readings came in 0.1 percentage points above expectations.
š What is driving inflation?
š Shelter costs increased byĀ 0.3%.
š Food prices climbed byĀ 0.5%.
ā” Energy prices rose by 0.7%, compared with Septemberās 5.2%Ā surge.
The slowdown in headline inflation is encouraging, but core CPI has now remained at +0.3% for three consecutive months. Underlying price pressures are proving difficult to eliminate.
š¦ The Fedās DecemberĀ Dilemma
The hotter-than-expected figures strengthen the argument for keeping monetary policy restrictive.
Fed Governor Christopher Waller has already suggested that a 50-basis-point rate increase could be considered if inflation worsens. Todayās report adds weight to the hawkish argument, although it does not guarantee a larger increase.
š What Does This Mean forĀ Markets?
š„ GOLD (XAU/USD): Higher yields and a stronger dollar could weigh on gold, although geopolitical uncertainty and persistent inflation may provide someĀ support.
šµ EUR/USD: Expectations of tighter US monetary policy could favour the dollar and increase pressure on theĀ euro.
š US TREASURIES: Investors may demand higher yields, particularly on shorter maturities sensitive to FedĀ policy.
š STOCKS: Higher borrowing costs could challenge equity valuations, especially in the technology sector.
šÆ THE NORDFXĀ VIEW
Inflation is slowing. The problem is that it is not slowing fastĀ enough.
Todayās report reinforces the risk that the Fed will need to maintain restrictive monetary policy for longer than investors hadĀ hoped.
ā ļø The next major question is whether a 25-basis-point increase in December will be sufficient, or whether the Fed will consider a more aggressive response.
š Stay ahead of market-moving events. Trade Forex, gold and global markets withĀ NordFX!
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š„ US CPI SHOCK: INFLATION COOLS, BUT NOT ENOUGH FOR THE FED was originally published in Coinmonks on Medium, where people are continuing the conversation by highlighting and responding to this story.