Notes from the Desk – US CPI – A Welcome Relief
Federal Reserve officials are feeling a bit more comfortable this morning as US October inflation data came in lower than expected.
- YoY headline inflation was 7.7% vs. 8% expected
- YoY core inflation was 6.3% vs. 6.5% expected
Used car prices dropped, adding further evidence that supply chains are improving. Although food and energy prices moved higher, declines in medical care, apparel, and airfares provided an offset.
One data point does not make a trend, so the Federal Reserve remains poised to hike by at least 50 bps in December. That said, the market is pondering whether a terminal rate below 5% is possible, leading to a strong rally in fixed-income and equity markets.