Following the release of the latest US inflation figures, Lindsay James, investment strategist at Quilter Investors has shared her assessment with us as follows saying:
“Despite the slight miss compared to expectations for US inflation, coming in a fraction hotter than many predicted, there should be enough for the Federal Reserve to crack on with a quarter point rate cut in November. Today’s US economic playbook has seen the Fed shift its focus from price stability to maximum employment in recent months, so today shouldn’t set any alarm bells ringing, but clearly large risks remain on the horizon.
“Conflict in the Middle East continues to threaten to send oil prices much higher and provide fresh inflationary concerns, while the recent hurricane damage in the US is likely to make data a little harder to collect and analyse for the Fed. As has been stressed heavily, cautious steps will be taken to bring rates down to a sustainable level, without troubling the wider economy.
“Core inflation, meanwhile, has actually increased to 3.3%, but too is unlikely to stand in the way of further rate cuts in November, having come down from 3.9% at the start of the year. Some components, such as shelter, are recognised to operate with a significant lag so it may be sometime for this to wash out of the system yet.
“What these figures do is eliminate any repeat of September’s bumper rate cut of 50 basis points. Strong payrolls figures last week had already dented these hopes, so market expectations will now moderate. However, markets have climbed higher over the course of the week on the back of increasing economic optimism, so today’s miss shouldn’t linger for too long.”
