Fed policymakers have recently breathed a sigh of relief on inflation, and their confidence that they are closer to achieving their goals will be crucially tested on Thursday. The U.S. Department of Labor will release the latest data on the closely watched consumer price index, which is expected to show further progress toward the Federal Reserve’s 2% target in September. Specifically, the Labor Department data expects annual inflation to be 2.2% and monthly inflation to be just 0.1%, according to the Dow Jones Consensus. However, excluding food and energy, core interest rates are expected to be 3.2% and 0.2% respectively, far from policymakers’ expectations. That difference could affect how quickly the Fed decides to act in a new rate-cutting cycle. Officials cut the benchmark overnight borrowing rate by half a percentage point, or 50 basis points, at their September meeting. However, following a better-than-expected jobs report in September, Fed officials have signaled in recent days that a more cautious approach to rate cuts may be in the future. The details in Thursday’s report are important: Housing inflation has proven stubborn, although policymakers still expect lower rent updates to be reflected in several months of data. But sudden increases in items such as auto prices and other discretionary items may have the Fed concerned about whether continued strong consumer demand will lead to higher inflation. Dallas Fed President Lori Logan warned in a speech on Wednesday that “further easing in financial conditions could stimulate spending and drive aggregate demand,” meaning lower mortgage rates, higher stock prices and easier credit conditions could It will stimulate another surge in inflation. While Logan said she still believes inflation will continue to return to the Fed’s target, she said the upside risks to inflation mean the Fed “should not be rushing to cut rates significantly” but should instead monitor financial conditions, consumer behavior and more. At the same time, interest rates are gradually lowered. , wages and prices. The report came as the S&P 500 hit a new high on Wednesday.
