Benzinga - by Piero Cingari, Benzinga Staff Writer.
U.S. inflation is continuing to defy expectations, causing heightened concern among investors who doubt that the Federal Reserve will end its rate-hiking cycle.
In September, the Consumer Price Index (CPI) rose by 3.7% year-on-year, mirroring August’s figure but surpassing the anticipated 3.6%. The core CPI index met the projected figures.
Nevertheless, economists largely appear to be leaning towards the notion that the Federal Reserve will maintain the current interest rates in November.
Economists React To A Higher-Than-Expected September CPI Report
Jeffrey RoachLPLFinancialinvestors should pay close attention to oil prices,Chris Zaccarelli, chief investment officer at Independent Advisor Alliance, suggests the Federal Reserve’s decision to raise rates on Nov. 1 is a toss-up. This uncertainty stems from higher-than-expected job numbers on Oct. 6 and recent inflation data exceeding expectations. The Fed appears to be grappling with the dilemma of avoiding excessive tightening, as evidenced by the balanced risks outlined in their recent minutes.
Mohamed El-Erian, president of Queens’ College, Cambridge, and chief economic adviser at Allianz, emphasizes the challenges in the final stage of combatting inflation. Core service inflation remains a concern, and the potential spillover of higher energy prices into core CPI adds complexity to the situation.
Andreas Steno Larsen, the founder and CEO of Steno Research, offers a contrarian perspective, diverging from the consensus view. Larsen contends overall inflation is running too high, with some categories experiencing an acceleration. He underscores the notion the Federal Reserve still has work to do in this regard.
INFLATION CEMENTING A HIKE IN NOVEMBER/DECEMBERA few upbeat signs but overall inflation is too hot and it is even accelerating in some categories.
Still work to do for the Fed here
Full data driven reaction -> https://t.co/c260WwSaD4 pic.twitter.com/dha3cWqgZZ
— AndreasStenoLarsen (@AndreasSteno) October 12, 2023
Joseph Brusuelas, principal and chief economist at RSM US LLP, highlights shelter, and in particular owner equivalent rate (OER), is the primary driver of inflation. He anticipates a significant easing of this factor in the near future as real-time data suggests lower costs, which should eventually be reflected in official data.
Charlie Ripley, senior investment strategist at Allianz Investment Management, believes the latest Consumer Price Index (CPI) data doesn’t provide strong motivation for the Fed to take immediate action at the Nov. 1 meeting, as the inflation figure gradually moving closer to the Fed’s target of 2 percent.
Market Reactions To The CPI Report: Dollar Rallies
Stocks headed lower, with the SPDR S&P 500 ETF Trust (NYSE:SPY) trading slightly negative at 10:40 a.m. ET, after four straight days of gains.
Nine out of 11 sectors traded in the red Thursday, with the sole exception of the Energy Select Sector SPDR Fund (NYSE:XLE), up 0.6%, and the Technology Select Sector SPDR Fund (NYSE:XLK), up 0.8%. The Utilities Select Sector SPDR Fund (NYSE:XLU) and the Consumer Staples Select Sector SPDR Fund (NYSE:XLP) were the laggards, both down 1.4%.
Chart: U.S. Dollar and S&P 500 Price Actions After CPI Report
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