(Bloomberg) — Wall Street’s hopes that the Federal Reserve could ease up in its fight against inflation later this year were decisively frayed Thursday when September CPI data came in unexpectedly hot. The core CPI, which excludes food and energy, rose 6.6% from a year ago, the highest level since 1982.
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S&P 500 stock futures fell below 2% after rising 1.3%, and 10-year Treasury yields jumped above 4%.
“The CPI number is shocking,” said Andrew Brenner, head of international fixed income at NatAlliance Securities. He asked what the Fed might have to do about interest rates: “Are they going to 100 basis?”
Here’s what other analysts have said:
Sima Shah, Senior Global Strategist, Key Asset Management:
“There cannot be left in the market anyone who thinks the Fed can raise rates by less than 75 basis points at the November meeting. In fact, if this kind of bullish surprise repeats next month, we could face a fifth straight hike of 0.75% in December. , as interest rates flow through the peak of the Fed’s rate forecast before the end of this year.”
The composition of the inflation reading is perhaps more worrying than the overall figure. The increases in the Shelter and Medicare indices, which are the slippery sectors of the CPI basket, confirm that price pressures are very stubborn and will not subside without the Fed’s fight.”
Steve Schiavaroni, Senior Portfolio Manager at Federated Hermes:
“This report raises the risk that we could see a new high cycle in headline inflation before the end of the year. With energy prices rising again, oil prices in the mid-1990s in December could see us pass the key peak of 9.1% from June.”
“Looking at the ingredients, what is most concerning is the big jump in services. Service inflation is the most viscous. This is where shelter prices and wages reign supreme.”
Priya Misra, Global Head of Price Strategy at TD Securities:
Stronger headline and headline report so market action makes sense. Final price market rate was 4.66% before the report, now at 4.7% and this could continue to go higher. We are looking for a 5% terminal (effective at 4.83%).
James Athey, chief investment officer at Aberdeen Asset Management:
“These are not the markets for the CPI report or the Federal Reserve that it was hoping for. Inflation pressures remain stubbornly high despite some easing in areas particularly affected by the pandemic.”
“This will support bond yields and the US dollar, but there is more bad news for equities”
Oscar Munoz, American macro strategist at TD Securities:
“I don’t think that changes much for the Fed, just because it reduces the idea of the Fed pivot. They will probably continue to hike 75 basis points in November, and raise the risk of another 75 basis points for December. Although we We think they will do 50 basis points. As they advance into the restrictive policy area, they will become less hawkish in terms of the pace of price increases given that they have gone up a lot in the last year and growing concerns about financial stability.”
Ian Lingen, Head of US Price Strategy at BMO Capital Markets said in a note:
“While there is sure to be talk of a potential 100 basis point increase, these publications boost 75 basis points in November with the more relevant question of whether or not the December and February gains will increase.”
Neil Pearl, Chief Investment Officer at Premier Miton Investors:
“This publication raises the level of uncertainty and is bad news for the economy in general, but for consumers in particular. Peak interest rates are likely to be higher now. It is hard to find any positives in this for the economy or the markets.”
Seth Carpenter, Morgan Stanley’s chief global economist, via Bloomberg TV:
“If there is ever a time for people doing economic forecasting to be modest, it is the time. It is very difficult – it has taken much longer for commodity inflation to fall than we expected.”
(Updates with additional comments)
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Originally published at San Jose News Bulletin
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