September US CPI report comes in hot

Bret Kenwell, US investment analyst at investment platform eToro, says: “The September CPI report came in hot across the board, with headline figures above economists’ expectations. Both investors and the Fed were hoping for in-line or better results, providing some reassurance about the Fed’s decision to kick off its rate-cutting cycle with a 50 basis point reduction. We didn’t get that.

“The latest CPI figures are hardly a disaster, but after a far stronger-than-expected jobs report last week, many are questioning the Fed’s decision to cut by 50 basis points last month. The two reports have all but taken another 50 basis point cut off the table next month, while some could argue that it rules out a rate cut of any kind in November.

“Both bulls and bears can find things they like in this report. While year-over-year headline CPI continues to move lower, core CPI inched higher. If investors are looking for a silver lining, it’s this: Despite this morning’s disappointing jobless claims data, worries over the labour market eased with last week’s strong jobs report. While lower inflation is the goal, falling off a cliff may cause some concern about the economy. One report doesn’t make a trend, but the US economy appears to be on solid footing. We’ll turn our attention to the retail sales report and to earnings to get better insights on the health of the consumer.

“The next several weeks have a number of potential hurdles for investors to clear, including earnings season, the election, and the Fed’s next interest rate decision. Today’s CPI report will lower enthusiasm around rate cuts next month, and if some of these other catalysts increase uncertainty, it could act as a short-term excuse for markets to pull back — particularly with the S&P 500 at all-time highs.”