The US inflation fell to 2.4 percent in September, but exceeded expectations, consolidating forecasts that the Federal Reserve will cut interest rates by a quarter point at its next meeting in November.
The overall figure of the Bureau of Labor Statistics It was below August’s 2.5 percent annual increase, but above economists’ expectations of 2.3 percent.
The data, the last before the Nov. 5 presidential election, came after the Fed cut rates by half a point last month, more than usual, amid signs they were succeeding in their battle to control price pressures.
After the publication of the data inflationas well as numbers showing rising unemployment, investors increased their bets on a quarter-point cut at the Fed’s November meeting.
Markets were already pricing in a around 90 percent chance of such a cut in November after the data was released, compared with 80 percent previously.
The yield on two-year Treasury bonds, which is sensitive to interest rates and moves inversely to prices, fell 0.06 percentage point to 3.96 percent. He S&P 500 closed with a drop of 0.21 percent, the Dow Jones fell 0.14 percent and the technology Nasdaq gave up 0.05 percent.
The inflation September marked the sixth consecutive month in which the general annual rate registered a fall; However, once volatile items such as food and energy were removed, the underlying indicator rose faster than expected, 3.3 percent. Economists expected it to remain at August’s 3.2 percent.
“It’s just evidence that it’s going to be a gradual path from here to get to the Fed’s goal,” he said. Tony Rodriguezhead of fixed income strategy at asset manager Nuveen, referring to the central bank’s 2 percent inflation target.
“The easy gains in disinflation are already far behind us, from now on the road is likely to be a little bumpier,” he added.
Unemployment insurance claims data also exceeded expectations. The number of Americans asking for help increased to 258,000, almost 30,000 more than the number that was forecast and the largest weekly increase since August 2023.
The latest figures present a mixed picture of the world’s largest economy just weeks before the elections.
The vice president and Democratic candidate, Kamala Harrisis struggling to overcome voter discontent over rising costs in his bid for the White House. Harris hoped that a more benign economic backdrop of solid growth and falling interest rates would strengthen his chances against donald trump.
“The (inflation) number may not help Harris’ campaign because voters pay more attention to their personal experience of paying prices that rose than to government data,” he said. Erik Gordonprofessor at the University of Michigan Ross School of Business.
Lael Brainarddirector of the White House National Economic Council, said the figures are in line with the trend that prevailed before the pandemic and the invasion of Ukraine boosted inflation.
The campaign of trump took advantage of the latest inflation data and applications for unemployment insurance benefits, warning that the US economy “is going to collapse into the worst depression this country has ever seen” if Harris is elected.
“Americans will continue to be robbed of their salaries with astronomical inflation and higher taxes,” reads a statement.
US central bankers will also analyze the data as they struggle to determine how quickly they should reduce interest rates to a “neutral” level that no longer inhibits economic growth.
Austan Goolsbeepresident of the Chicago Fed, brushed aside concerns about inflation. The general trend was “clearly that the inflation has gone down a lot and the labor market has cooled to a level that is close to where we believe full employment is,” he told CNBC.
The president of the Richmond Fed, Thomas Barkinsaid that inflation is going in the right direction; however, Raphael Bosticof the Atlanta Fed, admitted in an interview with The Wall Street Journal that he would “feel completely comfortable skipping a meeting if the data suggests it is appropriate.”
Intermonthly general inflation remained at 0.2 percent in September, the same figure as the previous two months, due to increases in food and housing prices; However, energy prices fell 1.9 percent during the month.
Seamus Mac Gorainglobal director of rates JP Morgan Asset Managementargued that reducing housing-related “accommodation” inflation is vital for the Fed to return to its target.
Although rental costs have been falling in the US for a year, the general “accommodation” index continues to increase, although in September it only rose 0.2 percent compared to 0.5 percent the previous month.
The decline in inflation from its 2022 peak of 9.1 percent has so far not led to a significant weakening of the labor market, surprising many economists.
The data says that the US economy is strong. Voters in swing states disagree.
Last week’s US employment report showed that companies added 254,000 jobs in September, exceeding expectations. The unemployment rate fell to 4.1 percent after several months of increases.
The president of the New York Fed, John Williamsdeclared to Financial Times that monetary policy is “well positioned” to achieve a soft landing after the half-point cut, as inflation moderated and the economy continued to grow.
Williams He said Fed officials’ projections released last month, indicating half-point cuts would occur at the remaining two meetings this year, were a “very good base case.”
The president of the Fed, Jerome Powellrecently suggested that such a reduction would be achieved through two quarter-point cuts rather than another half-point move.
