The Bureau of Labor Statistics released its Consumer Price Index which is a leading gauge of Inflation in the U.S. This report showed that headline inflation rose 0.4% in the month of September. Core CPI, which strips out volatile food and energy prices, rose by 0.3%. Year-over-year headline inflation rose 3.7% and annual Core inflation is now up 4.1%.
Even though inflation came in slightly hotter than estimates, annual Core CPI is now at a two-year low at the aforementioned 4.1%. We all know that the Federal Reserve is trying its best to lower inflation by raising its Federal Funds Rate. So, is this enough? What is needed for the Fed to possibly pause again at their next meeting on November 1st?
As financial conditions continue to tighten, a growing number of Fed officials are publicly saying that they believe the federal funds rate is already high enough to get inflation down to its 2% target.
Fed Governor, Christopher Waller said, “We’re finally getting very good inflation data. If this continues, we’re pretty much back to our target.”
Atlanta Fed President, Raphael Bostic said, “I actually don’t think we need to increase rates anymore. Policy is sufficiently restrictive.”
Dallas Fed President, Lorie Logan said, “If long-term interest rates remain elevated…there may be less need to raise the Fed Funds Rate.”
If this is the case and we do not get any more rate hikes and the Fed’s tone becomes more “dovish” or accommodative, this could be part of the recipe for better long-term rates ahead.
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By: Jon Iacono