Both The US CPI & Core CPI Inflation Beat Market’s Forecasted Figures
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Summary:
- US CPI inflation beat market expectations.
- US Core CPI inflation beat market expectations.
- Initial market reaction.
US CPI & Core CPI Inflation beat market expectations
After breaking out last week, the US dollar is maintaining its recent highs. The primary US catalyst for this week is the release of CPI data today. According to economists surveyed by Reuters, the CPI is anticipated to have risen by 8.1% in September compared to the same month a year prior, which is only slightly less than the 8.3% annual increase seen in August.
The actual US CPI inflation (YoY) came in at 8.2%, beating market expectations.
For the White House and legislative Democrats, the continued high inflation has been a major political concern, overshadowing the coronavirus pandemic's quick recovery and the creation of millions of jobs since Joe Biden took office.
The Core CPI is anticipated to rise for a second consecutive month, with the rate rising to 6.5% in September from 6.3% in August. Additionally, the Summary of Economic Projections (SEP) shows a higher path for US interest rates, which could fuel anticipation for another 75bp Fed rate hike.
The actual US Core CPI inflation (MoM) came in at 6.6%, also beating market expectations.
Effect on the markets
The market will probably jerk in either direction after the September CPI report is released. The bar remains very high to change the perception surrounding a 75 basis point rate hike from the FOMC in November, despite the possibility of volatility across asset classes.
The Federal Reserve may face pressure to maintain its approach to battling inflation if the core CPI increases once again, according to the minutes from the September meeting that revealed “many participants emphasized that the cost of taking too little action to bring down inflation likely outweighed the cost of taking too much action.”
The initial reaction from the EUR/USD was bearish, USD/JPY was bullish as the dollar strengthened in the wake of the news, the S&P500 also jumped and Bitcoin remained on a downward trend.
Sources: investing.com, financialtimes.com, finance.yahoo.com, dailyfx.com
