US Inflation Rises Beyond Projections: Markets Jittery, Rate Hike in Question

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In September, U.S. inflation surpassed expectations, with the U.S. Bureau of Labor Statistics revealing a 3.7% year-on-year surge in the consumer price index (CPI), as per the latest data. While core inflation slightly decreased from 4.3% to 4.1%, market pundits anticipate that the U.S. Federal Reserve might hike the federal funds rate, given the persistent inflation trend.

Rising U.S. Inflation Sends Ripples Through Markets

The recent CPI data from the U.S. Bureau of Labor Statistics indicates that September’s inflation exceeded projections. The labor department noted, “The consumer price index for all urban consumers (CPI-U) rose 0.4 percent in September on a seasonally adjusted basis, after increasing 0.6 percent in August.” The U.S. agency added:

The index for shelter was the largest contributor to the monthly all items increase, accounting for over half of the increase. An increase in the gasoline index was also a major contributor to the all items monthly rise.

All four major U.S. stock indices took a hit on Thursday, with the crypto market shrinking 1.34% to settle at $1.04 trillion. Bitcoin (BTC) is now hovering below the $27K mark, shedding 4.4% in just a week. Meanwhile, gold and silver didn’t fare much better, tumbling after the U.S. Labor Department released its latest inflation data. Speculations are rife that the persistent inflation might prompt the U.S. central bank to hike up the benchmark interest rate.

Yet, there are skeptics in the mix. Andrew Hunter, Capital Economics’ deputy chief U.S. economist, shared his perspective with CBS, predicting a decrease in inflation. “There is nothing here that will convince Fed officials to hike rates at the next FOMC meeting, and we continue to expect a more rapid decline in inflation and weaker economic growth to result in rates being cut more aggressively next year than markets are pricing in,” Hunter said.

At precisely 10:00 a.m. Eastern Time on October 12, 2023, the CME Fedwatch Tool gave its forecast: the odds are stacked against a rate hike in the looming meeting, just 20 days away. An overwhelming 87.4% probability suggests the Fed will hold steady, while a mere 12.6% chance indicates a potential uptick of 25 basis points.

What do you think about the rise in U.S. inflation? Share your thoughts and opinions about this subject in the comments section below.