Following an unexpectedly robust unveiling of the Non-Farm Payroll report earlier this month, the spotlight swiftly shifted to the eagerly awaited US inflation report. This pivotal report held the power to illuminate the Federal Reserve’s stance on interest rates as we navigate forward. Anticipation had been building, with all eyes on the year-over-year figures, poised for a potential shift from 3.7% to 3.6%. Yet, as the numbers emerged, they held firm at 3.7%, resisting any expected wane.
Delving into the finer details, inflation did decelerate from 0.6% to 0.4% on a month-to-month basis, though not quite aligning with the market’s more conservative 0.3% projection. Meanwhile, the core inflation rate fell in line with consensus, showing a decrease from the prior 4.3% to a more tempered 4.1%. The month-to-month core figure remained steadfast at 0.3%, adhering to expectations.
Amid these financial fluctuations, the release of the FOMC minutes recently offered a glimpse into the prevailing sentiments among its members, casting a shadow of caution over the prospect of further rate hikes this year. The awaited inflation data, therefore, held the promise of becoming a significant indicator for the upcoming November meeting. In the current landscape, the CME FedWatch Tool presents a 92.6% probability of a forthcoming pause in November, marking a slight reduction from the earlier 95% expectation that prevailed prior to the release.
Sources: US Bureau of Labour Statistics, CME Group
Piece written by Tiaan van Aswegen, Trive Financial Market Analyst
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