Investors are focused on next week’s CPI data
On Tuesday, investors will digest one of the key data points the Federal Reserve will consider in its next interest rate decision: the October Consumer Price Index (CPI).
The report is expected to show headline inflation of 3.3%, a slowdown from September’s annual price increase of 3.7%, according to Bloomberg estimates. Last month, consumer prices were expected to have risen 0.1% in October, a slower increase than the 0.4% monthly rise in September.
Lower energy costs are likely to have led to a smaller increase in overall numbers.
On a “core” basis that excludes the more volatile costs of food and gas, prices are expected to have risen 4.1% in October compared to a year earlier – matching the annual increase in September, according to Bloomberg data. Monthly core prices are expected to have increased by 0.3%, also in line with the monthly increase in September.
“October’s subdued overall CPI rise will likely be overshadowed by further firm reading in the core,” Wells Fargo wrote in a note ahead of the report.
The bank said the core CPI was likely to signal “slower progress on inflation”, adding: “While accommodation disinflation likely resumed in October, the steady pressure from health insurance will continue with the release this year.” expected to increase this month. Commodity deflation has probably taken a break.”
The Wells Fargo team expects the core CPI to still rise by about 3% per year this time next year, noting that “slower inflation in the coming months does not necessarily mean a victory in the “Inflation means”.