U.S. September CPI fell for the sixth consecutive month, will the Federal Reserve slow down its rate cut pace in November?

According to data released on Thursday, the overall inflation growth rate in the United States slowed in September but remained higher than expected, indicating a pause in the recent easing of price pressures. This may provide a reason for the Federal Reserve to slow down its rate cut pace.

The non-seasonally adjusted CPI in the United States fell from 2.5% in the previous month to 2.4% in September, marking the sixth consecutive month of decline and hitting a new low since February 2021, but still higher than the market's expected 2.3%. The non-seasonally adjusted core CPI in the United States recorded 3.3% in September, reaching a new high since June, higher than the market's expected 3.2%. The month-on-month growth rates of overall CPI and core CPI in September were 0.2% and 0.3% respectively, consistent with the previous values and exceeding expectations.

Meanwhile, the initial jobless claims in the United States for the week ending October 5th reached 258,000, higher than the expected 230,000 and the previous value of 225,000, hitting a new high since August 5, 2023. This may have been influenced by factors such as hurricanes.

After the release of the U.S. CPI data, the market fluctuated sharply, with spot gold experiencing a short-term volatility of $17, hitting an intraday high. The U.S. dollar index briefly touched the 103 level, currently trading flat before the non-farm payroll data, with a 15-minute volatility of nearly 50 points.

Short-term interest rate futures in the United States rose after the inflation data was released. Traders began to unwind bets on the Fed pausing rate cuts in November, increasing bets on a 25 basis point rate cut.

Analyst Enda Curran pointed out that the upward pressure on inflation from housing was expected, but the food sector also seemed to play a role. The housing index rose by 0.2% in September, while the food index rose by 0.4%. These two indices together accounted for over 75% of all item growth.

At first glance, the CPI numbers are indeed high, as both the month-on-month and year-on-year increases in both overall and core CPI exceeded expectations. The rise in core prices is not just a rounding issue, as it increased by 0.312% in the month. Super-core service prices rose by 0.4% in the month, the fastest pace since April.

However, analyst Cameron Crise pointed out that hidden beneath the surface is a sharp increase in initial jobless claims, which rose by 258,000 as of the week ending October 5th. This seems to have been caused by Hurricane "Helen". The market's reaction to the unemployment claims data is understandable, but given the temporary driving factors, this reaction may be somewhat untimely.

Analyst Adam Crisafulli from Vital Knowledge stated that as the FOMC's rhetoric has recently shifted positively towards employment, Powell and his colleagues may spend more time evaluating initial claims data rather than CPI. Additionally, the slowdown in housing inflation is a potential positive development Institutional analysis believes that although the US CPI in September rose slightly higher than expected, the annual inflation rate saw the smallest increase in over three and a half years, still possibly prompting the Fed to continue cutting interest rates next month.

Analyst Chris Anstey stated that the slightly higher-than-expected CPI report provided the rationale for a 25 basis point rate cut next month instead of 50 basis points.

Pepperstone analyst Michael Brown also mentioned that despite the higher-than-expected US inflation data, the September CPI data seems unlikely to substantially alter the policy outlook of the FOMC. He pointed out:

"Despite the stronger-than-expected September employment report and with ongoing progress against inflation, it is expected that the remaining two FOMC meetings this year will each cut rates by 25 basis points. This rate-cutting pace may continue until 2025, when the federal funds rate is expected to return to a neutral level of around 3% by next summer. Essentially, this is the 'Fed put option,' which continues to exist in a strong and flexible form, providing further confidence for participants to move away from the risk curve, while also keeping stock market declines relatively shallow and seen as buying opportunities."

Analyst Joseph believes that the focus in the future will be on consumer spending data, therefore the upcoming retail sales report next week will be crucial for the outlook of Treasury yields for the remaining time this month