Core inflation for the US in October rose 0.2% month-on-month, coming in lower than estimates of 0.2%. Headline inflation, including food and energy prices, were unchanged, undercutting estimates of a 0.1% price increase.
Year-on-year, headline inflation came in 0.1% lower than expectations at 3.2%, while core increased 4% year-on-year, compared with the estimate of 4.1%. The lower-than-expected prices meant the US Federal Reserve is likely to take a December interest rate increase off the table.
CPI Encouraging for US Fed
Most market commentators believe this latest set of data points is encouraging. According to Jay Bryson, chief economist at Wells Fargo, the dovish October Consumer Price Index (CPI) print means the Fed will need to work hard to justify a new rate hike.
“The bar for further rate hikes is getting higher and higher at this point,” he said.
After the news broke the S&P 500 rose 0.9%.
The US Fed has kept interest rates at 5.25-5.5% for several months as the US economy responded to higher rates with signs of slowing growth and a cooling labor market. Unemployment rose by 0.2% to 3.9% in October, while the number of new jobs added came in lower than expectations at 150,000.
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However, Federal Reserve chair Jerome Powell said during his last speech that the central bank would keep rates high to fight stubborn inflation in certain sectors. Food and beverages, housing, and services rose 0.3% in October and remain a concern.
Kathy Jones of Charles Schwab & Co. said that, despite the good CPI news, the central bank needs more data before it will consider its tightening a success.
“I think the Fed sticks with it’s on-hold policy until they get a series of low month-to-month readings over a period of 3 to 6 months and/or the labor market shows a lot more weakness,” she said.
Bitcoin Unperturbed by CPI Data
After the news broke, the S&P 500 rose 0.9%. Bitcoin (BTC) rose to just under $36,700 before falling back to $36,570 at press time. Ethereum (ETH), the second-largest cryptocurrency by market cap, also gained slightly after the CPI data but was flat on the day.
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Bitcoin has been increasingly dependent on investor sentiment, and less so on Fed policy in recent months. Last month’s labor data saw the asset trading flat, with several on-chain indicators appearing to push Bitcoin’s price up before the Fed’s November announcement.
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