CPI sets the stage for more of the same from the Fed in December

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The Consumer Price Index increased 0.2% in October, bringing the annual inflation rate to 2.6% — in line with analyst estimates but still putting prices higher than where the Fed would like. 

So-called Core CPI, which excludes volatile food and energy prices, also came in as anticipated, rising 0.3% over the month and 3.3% annually. 

The CPI for the 12 months ended in September was 2.4%. This latest reading should assure investors that the Fed, as the latest dot plot had indicated, will continue on its easing path through the end of the year. 

Odds of a second 25-basis point interest rate cut in December are now at 82%, up from 58% a day ago, according to CME Group data. 

Given today’s unsurprising numbers, the focus now shifts to 2025, when President-elect Donald Trump will move back into the White House and potentially complicate the central bank’s mission with his ambitious economic plans. 

The print comes a day before Fed Chair Jerome Powell is scheduled to speak at the Fed Bank of Dallas, so maybe we will get a sense of how he’s thinking about economic policy then. Markets will be listening, and so will we.

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