Reaction roundup: Experts, analysts weigh in on September CPI report

Investing.com -- Wall Street’s focus on Wednesday was on the September U.S. consumer inflation report which showed an acceleration in price pressures on an annual basis, prompting traders to boost their expectations of a Federal Reserve rate hike later this month.

As per the U.S. Bureau of Labor Statistics, the headline consumer price index (CPI) ticked up 0.6% M/M in September and core CPI rose 0.3% M/M, compared to estimates of 0.6% and 0.2%, respectively, and August readings of 0.4% and 0.3%, respectively.

On a Y/Y basis, headline CPI climbed 3.7% in September, while core CPI advanced 2.6%. Both figures were higher than the estimates of 3.6% and 2.5%, respectively, and marked an acceleration from August’s levels of 3.4% and 2.4%, respectively.

The CPI report put a Fed rate hike in October back into play, after odds of such a move had taken a significant hit over the last few weeks following favorable data on U.S. economic growth, the central bank’s preferred inflation gauge, and the labor market.

According to the CME FedWatch tool, the probability of a quarter-point hike later this month now stood at around 39%, up from nearly 22% before the release of the consumer inflation data.

Wall Street stock index futures turned negative after the CPI data, while U.S. Treasury yields spiked. The benchmark S&P 500 eventually opened lower and was last down 1%, while the 10-year Treasury yield climbed 3.1 basis points to 5.248%.

Here are some popular exchange-traded funds that track the S&P 500: SPDR S&P 500 ETF Trust, Vanguard S&P 500 ETF, and iShares Core S&P 500 ETF.

See below for various reactions to the CPI data:

Jamie Cox, managing partner at Harris Financial:

“Inflation is cooking with gas. It is abundantly clear where the inflation impulse originates, but two wars need to end before we get any relief. The Federal Reserve made the mistake of calling covid era inflation transitory, and now it appears they are set to make the same mistake in reverse on the energy supply shock.”

Jeffrey Roach, chief economist at LPL Financial:

“Inflation pressures are broadening beyond energy, suggesting the last mile back to target could remain bumpy and keep interest rates elevated. The latest report complicates the Fed’s decision this month, as the road back to price stability is looking increasingly difficult to navigate.”

Charlie Ripley, senior investment strategist at Allianz Investment Management:

“While the headline inflation number is initially raising eyebrows for investors and lifting bond yields, much of that figure is being fueled by higher gasoline prices. Once you get past the pump and look under the hood, the core inflation picture appears to be more moderate.

Shelter, airfares, and used cars were the surprising factor lifting core inflation above expectations. The acceleration of shelter was a primary component that was not expected and given the weight, it drove roughly 0.15 percentage points to the core inflation print alone.

Overall, we don’t think the increase in shelter costs is the beginning of a broader trend and would caution against this report leading to a more aggressive stance from the Fed in the coming months.”

Danni Hewson, head of financial analysis at AJ Bell:

“Donald Trump has been trying to bring down the cost of diesel for American motorists ahead of next month’s mid-terms, but it was the price of gas that was cited as the primary driver for September’s inflation jump. Cost of living pressures have already started to show up in company earnings updates, and the U.S. president will also be acutely aware of rising U.S. Treasury yields.”

Joseph Brusuelas, principal and chief economist at RSM US:

“(The CPI) for September provided little in the way of cooling prices, abatement in energy costs or evidence of broader disinflation that would provide cause for the Federal Reserve to rethink the direction of monetary policy. We think the Fed will adopt one more 25 basis-point increase in its policy rate this year.

Three supply shocks—trade, energy, and artificial intelligence—all are combining to drive inflation higher heading into the final three months of the year.”

Robin Brooks, senior fellow in economic studies at the Brookings Institution:

“Not a good CPI number. Last month it was wireless services that spiked core inflation and were a reasonable excuse for the Fed to pause later this month. But today’s reading puts an October hike back on the table. If the Fed doesn’t hike, debasement wins.”

Ross Gerber, CEO of Gerber Kawasaki Wealth and Investment Management:

“CPI would be just fine if it weren’t for this administration and its endless war it started in the Middle East…it’s all energy driving inflation. Higher rates will do nothing to stop it.”

Original Article

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