US Inflation Falls to 2.4% in September, Exceeding Expectations
The latest US inflation data has sparked speculation about the Federal Reserve’s next move, with expectations high for a quarter-point interest rate cut in November.
According to the Bureau of Labor Statistics, inflation fell to 2.4 per cent in September, slightly below August’s figure but still higher than economists’ expectations. This marks the sixth consecutive month of declining annual headline inflation.
Investors reacted to the news by increasing their bets on a rate cut at the November Fed meeting, with markets pricing in a 90 per cent chance of a quarter-point reduction. The two-year Treasury yield dipped, and the S&P 500 saw a slight decline in Thursday morning trading.
While the headline inflation figure decreased, core inflation, which excludes volatile items like food and energy, rose to 3.3 per cent in the year to September, surpassing expectations. Economists had anticipated the core rate to remain steady at 3.2 per cent.
The mixed economic data comes just weeks before the presidential election, with Vice-president and Democratic nominee Kamala Harris facing challenges in addressing voters’ concerns about rising costs. The Trump campaign seized on the inflation and jobless claims data, warning of a potential economic downturn if Harris is elected.
Despite the inflation figures, some experts remain optimistic about the economy’s trajectory. Lael Brainard, director of the White House National Economic Council, noted that the data aligns with pre-pandemic trends and shows progress in controlling costs.
As the Fed considers its next steps, officials like Richmond Fed president Thomas Barkin and Chicago Fed president Austan Goolsbee are monitoring the situation closely. Goolsbee emphasized that inflation has decreased significantly, while Barkin expressed confidence that inflation is moving in the right direction.
Overall, the latest inflation data sets the stage for a potentially pivotal Fed meeting in November, as policymakers weigh the need for further rate cuts to support economic growth.
