How does Wall Street view the US CPI? The pace of rate cuts may slow down, but the downward trend in inflation remains unchanged

The U.S. Bureau of Labor Statistics released data on Thursday showing that the U.S. CPI rose by 2.4% year-on-year in September, slightly slower than the previous value of 2.5%, but exceeded the expected value of 2.3%; the core CPI in September (excluding volatile food and energy costs) rose by 3.3% year-on-year, slightly exceeding both the expected and previous values of 3.2%. Most Wall Street analysts believe that the September CPI data is mixed, although it strengthened the expectation that the Federal Reserve will slow down the pace of interest rate cuts, ruling out a significant 50 basis point rate cut, it will not change the Fed's judgment that inflation is still on a downward trend.

Leo He from the trading team at UBS Securities:

"In September, the overall and core CPI in the United States increased by 18 basis points and 31 basis points respectively, higher than the market's expected 0.1% and 0.2% month-on-month growth rates. Details show that owner-equivalent rent slowed from 50 basis points last month to 33 basis points, but medical services increased from -9 basis points to 66 basis points, used car prices rose by 0.3% month-on-month, compared to -1% previously. Super core rose to 40 basis points, the highest since April."

Ali Jaffery from CIBC Capital Markets:

"Today's data will reinforce the expectation that the Federal Reserve is not in a hurry to act. The labor market is slowing down, but not collapsing yet, and inflation remains slightly above target."

Karl Schamotta, Chief Market Strategist at Corpay:

"Investors may have been too optimistic about a large rate cut after the September meeting, but in the coming months, a slow and gradual rate cut is still the most likely outcome."

Anna Wong, Head of Bloomberg Economics:

"The September CPI report contains both good and bad news about inflation. The good news is that progress in de-inflation of rents may finally be accelerating. The bad news is that inflation remains high in some key service categories, such as car repairs and insurance. De-inflation in core goods prices has stalled. However, even so, the price index favored by the Fed - the core PCE price index (to be released on October 31) may still rise more slowly than the CPI, as has been the case in recent months.

Overall, despite the core CPI exceeding expectations, we do not believe this report will change the Federal Open Market Committee's (FOMC) view that inflation is still on a downward trend. We expect the FOMC to cut rates by 25 basis points at the November 6-7 meeting."

Ira Jersey, Head of Bloomberg Economics Interest Rate Strategy:

"Higher-than-expected CPI data should rule out the possibility of a 50 basis point rate cut and may lead the market to doubt whether the Fed will cut rates by another 150 basis points as expected. Our focus is on consumers, so next week's retail sales report is crucial for the outlook of government bond yields for the rest of the month.

Inflation in core services continues to slow, with most unexpected increases seemingly coming from volatile car costs... The rise in core CPI is mainly influenced by volatile areas, while stable sectors continue to decline. This indicates that inflation will once again trend downwards over time." TradeStation's market strategy head David Russell:

"This data may not look as bad as it seems, as housing costs have slowed significantly. This is important because housing costs have always been the biggest ongoing issue for inflation. Friday's data is not good news, but it is also unlikely to have a significant impact, as the Federal Reserve is still in the early stages of its easing cycle. The days of major fluctuations caused by CPI may be fading away."

Jamie Cox from Harris Financial Group:

"The trend of inflation is still ongoing, but anyone who thinks the Federal Reserve will cut rates by another 50 basis points in November is sorely mistaken. When rates are not high enough to dampen growth, they are also not high enough to fully contain inflation. The Fed will cut rates, but the pace going forward will be very cautious."

Olu Sonola, head of U.S. economic research at Fitch Ratings:

"The good news is that the overall trend is still towards lower inflation, but the bad news is that service sector inflation remains a concern. Inflation is easing, but it has not disappeared. Following unexpectedly strong job data in September, this report encourages the Fed to maintain caution in the pace of its easing cycle. The most likely path at the moment is still a 25 basis point rate cut in November, but a rate cut in December should not be taken for granted."

Michael Brown from Pepperstone:

"Despite stronger-than-expected job reports in September and continued progress in lowering inflation, we expect the Fed to cut rates by 25 basis points at each of the remaining two FOMC meetings this year, and this pace of rate cuts may continue until 2025, until the federal funds rate returns to around a neutral level, approximately 3% by next summer. Essentially, this is what is known as 'Fed support', continuing to exist in a strong and flexible form, providing confidence to participants while keeping stock declines relatively shallow and seen as buying opportunities."

Florian Ielpo from Lombard Odier:

"While inflation data is generally unwelcome, it is beneficial for corporate earnings, thereby benefiting stocks. A large part of the recent stock market rally can be attributed to the dual drivers of falling interest rates and stimulus in the Chinese economy. However, with inflation proving more stubborn than expected, rates may face temporary upward pressure."