The big news last week was that September CPI core inflation declined but at a slower pace. This decline, along with rising mid- and longer-term Treasury rates, will allow the Fed not to raise interest rates any further this year.
- Year-over-year headline inflation was steady at 3.7%, while core inflation fell to 4.1%, from 4.3%.
- Getting inflation down from 9% to 2% isn’t easy and wringing out the last 2% will be the most difficult.
- Core CPI rose 0.2% in June and July, versus 0.3% in both August and September, with its three-month annualized rate at 3.1%., which is higher than in August.
- The principal culprit has been shelter costs which were up 0.6% month over month in September but are expected to fall in coming months based on real-time private sector measures of the rental markets. (Axios)
- Minutes of the September Fed meeting released last week conveyed member concerns that the outlook remained “highly uncertain.” Fed member comments this past week suggested that the recent rise in longer-term rates could reduce the need for further Fed increases.
The preliminary October University of Michigan consumer sentiment index fell sharply to a five-month low which will negatively impact consumer spending.
- Consumer sentiment and outlook for the U.S. economy has become more negative reflecting recent financial market turbulence, higher gasoline prices and higher mortgage rates.
- Consumer expectations for inflation over the next year also rose to 3.8% from 3.2% in September, with longer-run inflation expectations also moving higher.
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