Discrepancies Increase Over Federal Reserve Interest Rate Cuts.

On October 10th, local time, the U.S. Department of Labor released the Consumer Price Index (CPI), which slightly exceeded expectations, but the price increase is still gradually slowing down. Analysts believe that the Federal Reserve still has room for interest rate cuts this year, but the magnitude of the cuts will not be too large.

On the same day, the three major U.S. stock indexes opened lower collectively; the U.S. dollar index fluctuated near the flat line in the short term; gold futures rose in the short term, but then the increase narrowed.

Price Increase Exceeds Expectations

According to data released by the U.S. Bureau of Labor Statistics, the U.S. CPI in September rose by 2.4% year-on-year without seasonal adjustment, expected to rise by 2.3%, and the previous value rose by 2.5%; the CPI increased by 0.2% month-on-month after seasonal adjustment, expected to rise by 0.1%, and the previous value rose by 0.2%.

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Excluding energy and food prices, the core CPI in September rose by 3.3% year-on-year without seasonal adjustment, expected to rise by 3.2%, and the previous value rose by 3.2%; the core CPI increased by 0.3% month-on-month after seasonal adjustment, expected to rise by 0.2%, and the previous value rose by 0.3%.

The U.S. Bureau of Labor Statistics said that most of the inflation increase came from food prices and housing costs, which rose by 0.4% and 0.2% respectively, offsetting a 1.9% drop in energy prices. Other items that contributed to the increase include a 0.3% increase in used car costs, a 0.2% increase in new cars, a 0.7% increase in healthcare services, and a 1.1% surge in clothing prices.

However, there was also data showing signs of cooling in the U.S. labor market that day. The number of initial jobless claims in the United States last week was 258,000, expected to be 230,000, and the previous value was 225,000; the four-week average was 231,000, and the previous value was 224,250; the number of continued jobless claims for the week ending September 28 was 18.61 million, expected to be 18.3 million, and the previous value was revised from 18.26 million to 18.19 million.

After the release of the CPI data, the U.S. dollar index fluctuated near the flat line in the short term, reporting 102.932 as of press time.

Gold futures rose in the short term, once increasing by nearly 0.9%, but then the increase narrowed.Influencing the Pace of the Federal Reserve's Interest Rate Cuts?

The Consumer Price Index (CPI) and the Personal Consumption Expenditures Index (PCE) are two primary indicators that the Federal Reserve uses to gauge inflation. As these indicators gradually decline, the inflation situation in the United States is easing, and the Federal Reserve has already cut interest rates by 50 basis points in September. The market generally expects that the Federal Reserve will continue to lower interest rates, but there is still significant disagreement on the speed and extent of the cuts.

U.S. Benchmark Interest Rates and CPI, PCE Trends

According to the minutes of the Federal Reserve's September monetary policy meeting released on the 9th, there was considerable disagreement among Federal Reserve officials on the magnitude of the rate cut at that time. The vast majority of officials supported a substantial reduction of 50 basis points, but some officials also supported a minor reduction of 25 basis points.

The minutes revealed that although only Federal Reserve Governor Michelle Bowman supported a 25 basis point rate cut in the final decision, some officials also leaned towards her view during the meeting. In addition, several participants pointed out that "a 25 basis point rate cut would align with a path of gradual policy normalization, allowing policymakers time to assess the extent of policy constraints as the economy evolves." Some participants also added that a 25 basis point rate cut "could signal a more predictable path for policy normalization."

The minutes also showed that officials who supported a substantial rate cut generally believed that the readjustment of the monetary policy stance at that time would make the policy "more consistent with recent inflation and labor market data."

Participants unanimously agreed that the readjustment of the policy stance at the September meeting should not be interpreted as a signal that the Federal Reserve is preparing to rapidly cut interest rates. If the inflation rate continues to decline to the target level, and the employment rate continues to grow in line with recent trends, then it would be appropriate for the Federal Reserve's monetary policy to shift towards a more neutral stance over time.

Previously released U.S. non-farm employment data for September far exceeded expectations, with non-farm employment surging by 254,000 people, higher than the revised 159,000 in August and better than the Dow Jones consensus forecast of 150,000. The unemployment rate fell to 4.1%, down by 0.1 percentage points. After the data release, the market generally believed that good employment data could affect the pace of the Federal Reserve's interest rate cuts. At that time, the CME "FedWatch" at the Chicago Mercantile Exchange showed that the probability of the Federal Reserve cutting rates by 25 basis points in November was 89.4%, up from 71.5% previously; the probability of a 50 basis point cut was 10.6%, down from 28.5% previously. The probability of a cumulative 50 basis point cut by December was 74.5%, up from 45.8% previously; the probability of a cumulative 75 basis point cut was 23.7%, down from 44.0% previously; and the probability of a cumulative 100 basis point cut was 1.8%, down from 10.2% previously.

Regarding today's latest data, J.P. Morgan analyst David Kelly believes that the U.S. economy is "doing very well," and there are no inherent factors that would make the economy overheat or cool down. Therefore, from the Federal Reserve's perspective, given that interest rates are still too high, they may prefer to gradually reduce rates to a normal level.

Peter Cardillo, Chief Market Economist at Spartan Capital Securities in New York, believes that the inflation numbers are hotter than expected, and perhaps the process of inflation falling back is stalling. "We should not expect to see a decline in the inflation rate in the next two or three months." Peter Cardillo stated that the rise in the core inflation annual rate is disappointing. Although this is not terrible news, it is certainly not good news. "It just indicates that the best period for inflation to fall back may have passed in the next few months. This also suggests that the Federal Reserve will not be as aggressive as previously imagined, and from now until the end of the year, the Federal Reserve may only cut rates once, and in December, because the Federal Reserve will take its time."The Federal Reserve will hold its next monetary policy meeting on November 6th and 7th.