Fed Officials Send Mixed Signals Ahead of U.S. October CPI
The U.S. Consumer Price Index (CPI) for October is scheduled to be released tonight. Because some survey results used as a comparison base are unavailable due to last year’s government shutdown, the month-over-month figure will take precedence over the year-over-year figure. The median market forecast was for headline CPI of 0.25% and core CPI of around 0.2%.
UBS saw a possibility that inflation would come in somewhat above market expectations, reflecting the impact of oil prices, but forecast core CPI at about 0.23%. It said that declines in medical-service prices and increases in used-car prices were both being observed, making it necessary to examine the details. The key question was how services inflation would move, even if falling oil prices put downward pressure on inflation.
Comments from Federal Reserve officials added to uncertainty over the path of interest rates. Chicago Fed President Austan Goolsbee said the Fed should acknowledge its failures in fulfilling its dual mandate of price stability and employment, and pointed to rising service prices unrelated to energy and tariffs as well as overheating risks from data-center investment. Richmond Fed President Tom Barkin said interest rates may be at or slightly below the neutral level, but that the December Federal Open Market Committee decision had not been made and he would focus on inflation risks.
The probability of a rate hike in December was described as fluctuating between 70% and 80% in the market. The host noted that Fed officials were scheduled to speak repeatedly over the coming week, and that conflicting messages could confuse investors. Falling oil prices could ease rate-hike concerns, but both the CPI figures and Fed comments would need to be considered.