The trend for inflation is returning back toward pre-pandemic levels of normal, giving policymakers more latitude on interest rates, says Scott Garliss.
The Federal Reserve’s easing cycle appears to have remained largely intact following the release of September inflation data on Thursday.
The U.S. Bureau of Labor Statistics reported that the consumer price index (CPI) rose by 2.4% over the last 12 months, which was slightly higher than economists’ expectations for a 2.3% increase. However, the reading was lower than August’s 2.5% gain.
The report also showed that on a monthly basis, CPI rose by 0.1% compared to expectations for a 0.2% increase. August’s reading was revised down to a 0.2% gain from an initial report of no change.
The data comes as the Fed has raised its benchmark interest rate, the federal funds rate, five times this year in an effort to cool inflation and bring it back down to its 2% target. Officials have said they are targeting a “soft landing” for the economy, aiming to slow growth and inflation without causing a recession.
The central bank is expected to raise rates by another 50 basis points at its next meeting in early November, following a 75 basis point increase in September. Officials have also said they plan to continue raising rates into next year.
Following the September inflation data, the yield on 10-year U.S. Treasury bonds rose by 7 basis points to reach 4.1%. The yield on the 2-year note also rose by 3 basis points to hit 4.6%. Bond yields and prices move inversely.
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