PREVIOUS TRADING DAY EVENTS 12 Oct 2023

The U.S. CPI report yesterday showed that U.S. consumer prices increased in September. The annual increase in consumer prices excluding the volatile food and energy components last month was the smallest in two years.

With the labour market still tight, however, reaching the Feds 2 inflation target could be difficult, making it likely that the U.S. central bank could keep rates elevated for longer or even proceed to another hike.

The bigger picture is that the trend is still quite encouraging, but the fight continues, said Olu Sonola, head of U.S. regional economics at Fitch Ratings in New York. They Fed officials may now want to extend the pause to December, given the recent increase in longterm rates.

The CPI increased 0.4 last month, with a 0.6 jump in the cost of shelter accounting for more than half of the rise. The CPI soared 0.6 in August, which was the largest gain in 14 months. In the 12 months through September, the CPI advanced 3.7 after rising by the same margin in August. Yearonyear consumer prices have come down from a peak of 9.1 in June 2022.

We must wait for more data to see if this is just a blip or if there is something more fundamental driving the increase such as higher rent increases in larger cities offsetting softer increases in smaller cities, said Stephen Juneau, a U.S. economist at Bank of America Securities in New York.

Financial markets overwhelmingly anticipate the Fed will leave rates…