Raise Odds Increase
TO Colder-than-expected inflation print Investors and Wall Street economists alike are confident that the Federal Reserve is done raising rates, at least through the end of the year.
Immediately after the data was released, markets were pricing in a nearly 100% chance that the Federal Reserve would keep rates unchanged in December, according to CME Group data.
"The October CPI was weak on the services side, and a November number like this would not meet the bar we had previously set for an additional rise in December," wrote Ellen Zentner, chief economist at Morgan Stanley. "We think soft inflation and still tight financial conditions will keep the Fed on hold."
Still, that doesn't mean the central bank can declare victory over inflation just yet.
Outside housing, which rose just 0.3% month-on-month in October, Oxford Economics' chief US economist Michael Pearce warned: "There are signs that services inflation will prove sticky, reflecting tighter labor market conditions, with the prospect of a return to the 2% target still far away."
"Overall, the October CPI report gives Fed officials more confidence that inflation is on a firm downward trajectory, which should preclude any further rate hikes," Pearce continued.
"However, the disinflation process still has a long way to go, and the path to weaker services inflation depends on a continued cooling of labor market conditions, so it will still be a long time before the Fed Federal to be able to think about lowering interest rates."
