US inflation is likely to remain stubbornly high last month despite efforts by the Federal Reserve to get a grip on prices that surged at a historic pace.
The Bureau of Labor Statistics’ Consumer Price Index (CPI) for October is scheduled to be released at 8:30 a.m. ET on Thursday. Economists surveyed by Bloomberg expected headline readings to show an accelerated monthly increase of 0.6% from 0.4% in September, driven in part by the first jump in energy prices in four months.
The broadest measure is expected to have moderated to an increase of 7.9% annually, down slightly from September year-on-year increase of 8.2%. Core CPI, which strips out the volatile food and energy components of the measure, is expected to come in at 0.5% monthly and 6.5% for the year, little changed from 0.6% and 6.6%, respectively, last month. highest core prints since 1982.
The Federal Reserve keeps a closer eye on “core” inflation, which offers policymakers a look more focused on inputs like housing. Headline CPI, on the other hand, has moved largely in conjunction with erratic energy prices this year.
Economists at Bank of America (BofA) project shelter is again the main driver of October’s core reading, as housing costs comprise almost a third of the basket for consumer price inflation.
Transportation services are expected to remain on the rise due to higher airfares and car and truck rental prices, while medical care costs may decline, BofA said.
Thursday’s data will offer investors hints on how Fed officials will advance in their fight to restore price stability after raising interest rates by 75 basis points for the fourth straight time earlier this month. Investors are now anticipating a decline in December’s rate hike to a smaller increase of 0.50%.
“It’s not just the continued increase that’s troubling but the pervasiveness of surging prices in various spending categories that are straining household budgets,” Bankrate Chief Financial Analyst Greg McBride wrote in a note. “Despite half a dozen interest rate hikes by the Federal Reserve, any broad-based easing, significant, and sustained inflation pressure remains elusive.”
Moderations in economic data have prompted hopes that the US central bank will scale back its aggressive policy stance, but Fed Chairman Jerome Powell. stressed earlier this month that there were no plans to pause the run – dampening such optimism.
“Restoring price stability will likely require maintaining a restrictive policy stance for some time,” Powell said in prepared remarks after last week’s policy-setting meeting, later adding that officials have “several ways to go,” with payrolls still elevated and the reading inflation. which has not cooled fast enough.
Officials of the Federal Reserve have repeatedly signaled that the size and magnitude of hikes may slow down even if the fight against inflation is nowhere near more, stocking the possibility of a liftoff higher than expected from its key policy interest rate.
A wave of Wall Street strategists have raised bets on how much the central bank will ultimately raise the federal interest rate — and October’s CPI reading could confirm revised estimates.
Goldman Sachs was the first among the big banks in the days leading up to the November FOMC meeting to warn that rates could rise above 5% by March 2023.
After Friday Better-than-expected jobs reporteconomists at Bank of America upwardly revised their projections for the terminal rate of 5.0-5.25% from 4.75-5.0% and said the institution anticipates a 0.50% increase in December.
TD Securities raised its terminal rate forecast from a range of 4.75%-5.00% to 5.25%-5.50% and sees a 50-basis-point hike in the next meeting 13-14. december BNP Paribas expects a 75-basis-point increase next month and a terminal fed funds rate of 5.25% in the first quarter of next year.
“We consider the risk for our revised FOMC rate path to continue to lie to the upside and the upcoming prints on CPI inflation and the November jobs report will weigh heavily on the near-term path for Fed policy,” strategists led by Michael Gapen wrote on Friday. Notes.
Alexandra Semenova is a reporter for Yahoo Finance. Follow him on Twitter @alexandraandnyc