Inflation Eases, But Will the Fed Hold Off on Big Rate Cuts?

The Dow Jones Industrial Average closed above the 43,000 mark this week, and the S&P 500 rose to a new all-time high as well.? Despite the market climbing to new all-time highs, investors continue to monitor the presidential election, escalating geopolitical risk, inflation data, as well as corporate earnings that kicked off this past week.

The consumer-price index was released at the end of last week, and it showed that prices have increased at a rate of 2.4% over the past year.? That 2.4% rate is the smallest increase since February 2021 and the sixth straight decline in year over year inflation.? Inflation remains slightly above the Federal Reserve’s 2% goal. Core prices, which exclude items like food and energy, climbed 3.3% over the past year.? This is slightly hotter than the 2.2% rise we saw in the August figures.? Overall, it was a mixed bag for the inflation data that came out.? While it’s good to see the overall rate of inflation come down, there were concerns that core inflation ticking up may lead to smaller rate cuts in the future.

Another item that continues to catch the eye of investors is rising U.S. Treasury yields.? Treasury yields have increased recently with the benchmark 10-year note, which is used to determine rates for items like mortgages and auto loans, surpassing 4.1% last week.?

Bottom Line:

What will the Federal Reserve decide to do next month regarding interest rates?? Will they cut another 50 basis points?? Will it be 25 basis points?? Or will they possibly not cut at all?

It’s too early to know for sure.? A 50 basis point rate cut at the next Federal Reserve meeting seemed like all but certain a few weeks ago.? Now, the tables have turned and market expectations for a rate cut of that size have moved down.? The market will continue to digest the economic data that continues to roll in, and the Federal Reserve will make their decision based on that data.

- Retire Sooner Team at Capital Investment Advisors

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Read the original article this was based on here. (Paywall) ?

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