NOVEMBER 18, 2024 – INFLATION EDGES UP IN OCTOBER
The Consumer Price Index moved up slightly in October to 2.6 percent. This was disappointing after the September CPI of 2.4 percent was the lowest in three and a half years. It seems the path to the Fed’s two percent target is anything but linear. Core prices were up 3.3 percent.
Fed Chair Powell has been saying he expects inflation to come down on “a bumpy path.” The Fed sees current interest rates as restrictive, which means, without further cuts, the labor market could be negatively affected and increase the likelihood of a recession. The next inflation report will be released a week before the Fed meets again, and the final labor report of the year is out December 6. It is hoped the labor market will rebound after the dismal October report, which was likely an anomaly due to hurricanes and strikes. With this data in hand, the Fed can make a better decision next month.
Despite the tick up in CPI, investors are still optimistic the Fed will lower rates by another 25 basis points at the last meeting of the year on December 17-18. However, greater uncertainty exists for the pace of rate reductions in 2025. The Fed wants to avoid lowering rates too quickly, only to have to bring them up again in the short term.