The October CPI numbers, released October 14 were roundly cheered by investors, who chased the markets up to one of its best days of the year.
Count the CIBC economist Ali Jaffery as being fully on-board. In a report issued following the release of the numbers, the bank reversed course on its call for a rate hike in December, arguing that the Fed should be pleased with the progress that is being made in the fight against inflation.
“Despite still elevated non-housing services, the Fed will likely be pleased with this additional bit of progress as core inflation has remained steady in a range close to target since June,” he wrote. “As a result, we are removing our call for the Fed to hike in December. While there remains a risk the Fed could reassess its stance in early 2024, today’s data, combined with evidence of a softening labour market and most importantly, the change in tone of the FOMC to show greater patience suggests December is likely off the table. The FOMC has time to wait to assess the emergence of further price pressures.”
The economist says things have cooled considerably and it allows The Fed to pause and take a breath in the battle. He argues that we are through with rate hikes, in all likelihood.
“The underlying detail in today’s report suggest that the Fed has more time on its hand to decide as inflation has stayed in a range slightly above its target since June,” Jaffary wrote. “While demand-side price pressures remain, the FOMC will likely be pleased with the progress. This data, combined with signs of labour market cooling, and Powell’s desire to be more patient has us changing our call and now believing the Fed will hold at its December meeting. While there remain risks the Fed could reassess its stance in early 2024, it has very likely reached terminal.”
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