Budapest Post

Cum Deo pro Patria et Libertate
Budapest, Europe and world news

US inflation figures are lower than Wall Street forecast - but there's pain ahead for UK

US inflation figures are lower than Wall Street forecast - but there's pain ahead for UK

Lower than expected US inflation figures are raising hopes interest rates may not need to be raised as aggressively in the future - but it is by no means clear whether inflation has peaked on this side of the Atlantic.
Today's dramatic US inflation figures raise hopes that the Federal Reserve is winning the fight against the monster.

Consumer price inflation in October came in at 7.7% on a year-on-year basis - lower than the 7.9% Wall Street had expected - and at 0.4% on a month-on-month basis which, again, was lower than the 0.6% that had been forecast.

This was a landmark in itself, since it is the first time since February this year that the headline rate of annual inflation has gone below 8%.

More important still are the so-called 'core' inflation numbers. This is the number that strips out volatile elements such as energy, food and tobacco and is relied on by the Fed as an accurate barometer of underlying inflationary pressures in the economy.

Here, too, the numbers were heading in the right direction.

On a year-on-year basis, core inflation came in at 6.3%, which was lower than the 6.5% expected. And, on a month-on-month basis, core inflation came in at 0.3% against the 0.5% that had been forecast on Wall Street.

The figures will raise hopes that the Fed will not have to raise US interest rates as aggressively in future as it has been.

The Fed chair, Jerome Powell, indicated last month that the Fed was even prepared to risk a US recession in order to bring inflation under control and the central bank has raised its main policy, Fed Funds, by 0.75% in each of its last four policy meetings.

The market reaction was instant. US stock futures rose, as did US Treasuries (US government IOUs), sending Treasury yields (which move in the opposite direction to the price) lower.

There was a similar reaction in Europe. The FTSE-100, which had been languishing in negative territory all morning, immediately reversed those losses to post a 1.5% gain. Yields on gilts - UK government bonds and the focus of so much attention lately - also fell.

On the currency markets, the prospect of the Fed going easier on interest rate rises from now on sent the dollar lower. Sterling is currently ahead by some 2% against the greenback and heading back up towards $1.16. The euro has also posted a gain of more than 1% against the greenback on the session.

Seema Shah, chief global strategist at Principal Asset Management, said: "The first downside surprise in inflation in several months will inevitably be received by an equity market ovation.

"Not only is headline CPI back below its pre-Russia-Ukraine conflict level, but some details of the report suggest the long-awaited decline in inflation could now be underway.

"For now, however, despite both core and headline inflation easing, the best we can expect from the Fed is a downshift in the pace of tightening. A 0.5% hike, rather than 0.75%, in December is clearly on the cards but, until we have had a run of these types of CPI reports, a pause is still some way out.

"Let the market enjoy today, it still has another 100bps [1%] or so of tightening to commiserate."

Stuart Clark, portfolio manager at wealth manager Quilter, added: "Inflation in the US has once again fallen, giving some momentum to the idea that the worst is now behind us.

"The rate is lower than expectations and this will provide some relief to consumers and the wider market, however it is worth noting food and shelter is still increasing, so we're not completely out of the woods yet."

Those are points worth bearing in mind. At 7.7%, the headline rate of inflation remains significantly higher than anything most American households or businesses have experienced during the last four decades. The Fed is still going to have to carry on raising the cost of borrowing and not least because, as was shown by other figures published today, the US jobs market still remains immensely strong.

And on this side of the Atlantic, it is by no means clear that inflation has even peaked, as it appears to have in the US.

The headline CPI figure for September was 10.1% and it is unlikely to be any lower when the October figure is published nine days from now. The same can be said for the eurozone where, in October, headline CPI hit 10.7%.

So there is still a lot of pain to come for UK households and businesses.

That said, it is unalloyed good news that inflation in the US is starting to moderate, albeit remaining at a historically high rate.

So far as the fight against inflation goes, the US economy is not out of the tunnel yet, but the light at the end of it is hoving into view.
AI Disclaimer: An advanced artificial intelligence (AI) system generated the content of this page on its own. This innovative technology conducts extensive research from a variety of reliable sources, performs rigorous fact-checking and verification, cleans up and balances biased or manipulated content, and presents a minimal factual summary that is just enough yet essential for you to function as an informed and educated citizen. Please keep in mind, however, that this system is an evolving technology, and as a result, the article may contain accidental inaccuracies or errors. We urge you to help us improve our site by reporting any inaccuracies you find using the "Contact Us" link at the bottom of this page. Your helpful feedback helps us improve our system and deliver more precise content. When you find an article of interest here, please look for the full and extensive coverage of this topic in traditional news sources, as they are written by professional journalists that we try to support, not replace. We appreciate your understanding and assistance.
Newsletter

Related Articles

0:00
0:00
Close
Altman Says GPT-5 Already Outpaces Him, Warns AI Could Automate 40% of Work
Russian Research Vessel 'Yantar' Tracked Mapping Europe’s Subsea Cables, Raising Security Alarms
Global Cruise Industry Posts Dramatic Comeback with 34.6 Million Passengers in 2024
U.S. Demands Brussels Scrutinize Digital Rules to Prevent Bias Against American Tech
Private Equity’s Fundraising Surge Triggers Concern of European Market Shake-Out
Tokyo’s Jimbōchō Named World’s Coolest Neighbourhood for 2025
European Officials Fear Trump May Shift Blame for Ukraine War onto EU
The Personality Rights Challenge in India’s AI Era
Italy Considers Freezing Retirement Age at 67 to Avert Scheduled Hike
Italian City to Impose Tax on Visiting Dogs Starting in 2026
Study Finds No Safe Level of Alcohol for Dementia Risk
Trump Says Ukraine Can Fully Restore Borders with NATO Backing
Europe Signals Stronger Support for Taiwan at Major Taipei Defence Show
Germany Weighs Excluding France from Key European Fighter Jet Programme
Cyberattack Disrupts Check-in and Boarding Systems at Major European Airports
Björn Borg Breaks Silence: Memoir Reveals Addiction, Shame and Cancer Battle
When Extremism Hijacks Idealism: How the Baader-Meinhof Gang Emerged and Fell
JWST Data Brings TRAPPIST-1e Closer to Earth-Like Habitability
Trump Orders $100,000 Fee on H-1B Visas and Launches ‘Gold Card’ Immigration Pathway
France’s Looming Budget Crisis and Political Fracture Raise Fears of Becoming Europe’s “Sick Man”
Three Russian MiG-31 Jets Breach Estonian Airspace in ‘Unprecedentedly Brazen’ NATO Incident
European manufacturers against ban on polluting cars: "The industry may collapse"
Turkish car manufacturer Togg Enters German Market with 5-Star Electric Sedan and SUV to Challenge European EV Brands
Christian Brueckner Released from German Prison after Serving Unrelated Sentence
World’s Longest Direct Flight China Eastern to Launch 29-Hour Shanghai–Buenos Aires Direct Flight via Auckland in December
New OpenAI Study Finds Majority of ChatGPT Use Is Personal, Not Professional
The conservative right spreads westward: a huge achievement for 'Alternative for Germany' in local elections
Pope Leo Warns of Societal Crisis Over Mega-CEO Pay, Citing Tesla’s Proposed Trillion-Dollar Package
Poland Green-Lights NATO Deployment in Response to Major Russian Drone Incursion
U.S. and China Agree on Framework to Shift TikTok to American Ownership
Le Pen Tightens the Pressure on Macron as France Edges Toward Political Breakdown
Czech Republic signs €1.34 billion contract for Leopard 2A8 main battle tanks with delivery from 2028
Penske Media Sues Google Over “AI Overviews,” Claiming It Uses Journalism Without Consent and Destroys Traffic
Indian Student Engineers Propose “Project REBIRTH” to Protect Aircraft from Crashes Using AI, Airbags and Smart Materials
One in Three Europeans Now Uses TikTok, According to the Chinese Tech Giant
Could AI Nursing Robots Help Healthcare Staffing Shortages?
NATO Deploys ‘Eastern Sentry’ After Russian Drones Violate Polish Airspace
The New Life of Novak Djokovic
German police raid AfD lawmaker’s offices in inquiry over Chinese payments
Volkswagen launches aggressive strategy to fend off Chinese challenge in Europe’s EV market
France Erupts in Mass ‘Block Everything’ Protests on New PM’s First Day
Poland Shoots Down Russian Drones in Airspace Violation During Ukraine Attack
Apple Introduces Ultra-Thin iPhone Air, Enhanced 17 Series and New Health-Focused Wearables
Macron Appoints Sébastien Lecornu as Prime Minister Amid Budget Crisis and Political Turmoil
Vatican hosts first Catholic LGBTQ pilgrimage
Apple Unveils iPhone 17 Series, iPhone Air, Apple Watch 11 and More at 'Awe Dropping' Event
France joins Eurozone’s ‘periphery’ as turmoil deepens, say investors
France Faces New Political Crisis, again, as Prime Minister Bayrou Pushed Out
Nayib Bukele Points Out Belgian Hypocrisy as Brussels Considers Sending Army into the Streets
France, at an Impasse, Heads Toward Another Government Collapse
×