Inflation Hotter than Expected Ahead of Fed Meeting
After being near zero to over 5.25%, the Fed’s 11 attempts to raise interest rates seem to have not been enough to cool September’s prices. Released Thursday morning, the consumer price index, the gauge for retail inflation, came in hotter than expected after increasing 0.4% on the month compared to forecasts of 0.3%. On the bright side, core CPI, a more accurate inflation measure that excludes volatile energy and food prices, came in line with expectations of 0.3% growth for September. Both wholesale and retail inflation had been stronger than expected throughout the month of September, just in correlation with record rises in gas prices following Russia and Saudi production cuts to bolster prices.
Despite the rises in energy prices, the majority of September’s strong CPI reading actually came from shelter costs, which grew 0.6% for the month and up 7.2% when compared to a year ago. Service prices, which are regarded as a key metric for long-term inflation trends, also grew for the month by 0.6%. Alongside the CPI readings, the minutes of the FOMC meeting revealed the growing sentiment to keep rates higher for longer. In terms of restrictive monetary policy, FOMC members seemed to keep worries high over the uncertainty and upside risks that remain with lingering inflation. With both labor market data and inflation data remaining robust at the end of the year, investors could potentially expect hawkish behavior from Fed Chair Jerome Powell and the rest of the Fed coming at November 2nd’s meeting.
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I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.