US October CPI reduces the likelihood of another 75 bps hike at December – Wells Fargo
10.11.2022, 16:05

US October CPI reduces the likelihood of another 75 bps hike at December – Wells Fargo

US inflation rose less than expected in October, triggered a rally in Wall Street and sent the Dollar sharply lower. According to analysts at Wells Fargo, the data reduces the likelihood of another 75 basis points rate hike at the December 14 FOMC meeting. 

Key Quotes: 

“The overall consumer price index (CPI) rose 0.4% in October, which was lower than expected. Gasoline prices helped to push up the overall CPI, but consumers caught a break with a smaller increase in food prices.”

“October's moderation in inflation is welcome, but there remains a long way to go before inflation returns to a rate the Fed will tolerate. Weaker goods prices are merely the low-hanging fruit for getting inflation back on track. The torrid rise in goods inflation since COVID has reflected the unique aspects of the pandemic-driven shock, with the degree of price increases in weighty sectors like autos unsustainable.”

“Today's news on inflation is certainly welcome, and it reduces the likelihood of another 75 bps rate hike at the December 14 FOMC meeting. That said, the core CPI rose at an annualized rate of 5.8% between July at October, which is still much too high for the Committee's liking. It likely will be a number of months yet until the FOMC feels confident that inflation is indeed receding back toward its target of 2%. In short, we expect that the Fed policymakers will remain biased toward over-tightening rather than under-tightening for the foreseeable future.”
 

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