New inflation data Wednesday showed consumer prices rose as forecast in October, keeping the Federal Reserve on track to cut rates again in December.
“There is progress on inflation,” Claudia Sahm, chief economist at New Century Advisors, told Yahoo Finance after the data was released. “We’ve been headed in the right direction, but it’s been a slow grind. And this is another month that fits into that slow grind.”
The outlook remains uncertain as economists warn of another possible revival of inflation following the election of Donald Trump as the country’s next president.
Trump and his proposed policies are seen as potentially more inflationary because of the president-elect’s campaign promises of high tariffs on imported goods, tax cuts for businesses and curbs on immigration.
Immediately after Wednesday’s release, markets continued to price in a further 25 basis point rate cut in December, after the central bank cut rates by that amount last week. Traders currently see a more than 80% chance that the Fed will cut rates by 0.25% next month, up from just under 60% on Tuesday, according to data from CME’s FedWatch Tool.
“It is clear that the Federal Reserve’s job is still not complete and that the markets are right to reassess interest rate expectations for the Federal Reserve,” Eugenio Alemán, chief economist at Raymond James, wrote in a note to clients in response of the report.
“In this environment, it is only oil and petrol prices that keep inflation in check. That is, any increase in oil and gas prices could seriously jeopardize the Fed’s inflation target. The Fed should be particularly concerned about the services-less-energy component of the CPI. .”
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