Today, both the headline and the core CPI, which excludes food and energy, came in 0.1 percentage point higher than forecast for the month, with a month to month 0.2% increase in the headline index and a 0.3% rise for the core.On an annual basis, the headline index rose 2.4% in September, slightly less than the 2.5% in August. The core inflation rate, the more important number to the Federal Reserve, accelerated for the first time in one and a half years, to 3.3% from 3.2%.
Weekly initial claims for unemployment also came out today, Thursday, October 10, and showed a much-bigger-than-expected increase of 258,000, against the median forecast for 230,000.
Together the two reports almost cemented the odds of a 25 basis point cut in interest rates when the Fed meets on November 7.
Odds of a 25 basis point cut climbed to 89.1% today, according to the CME FedWatch tool, which calculates the odds of a move by the Fed based on prices in the Fed Funds Futures market. Odds of no change stood at 10.1%. Odds for a 50 basis point cut to match the size of the cut at the central bank’s September meeting fell to 0%.
That’s quite a change from a week ago when the odds for a 50 basis point cut on November 7 were at 32.1%.
With only the December meeting remaining after November 7, it’s hard for me to see the Fed delivering the 125 or 150 basis points in cuts for 2024 that the financial markets were pricing in during much of September.
