US inflation cools slightly, boosting Wall Street to record highs ahead of Fed rate cut
A shopper pushes a cart through a supermarket in Bellflower, California, on Feb 13, 2023. (File photo: AP/Allison Dinner)
WASHINGTON: US consumer inflation continued to heat up last month, but by less than expected, according to official data published on Friday (Oct 24), nine days late due to the ongoing government shutdown.
However, the slower pace of price rises sent Wall Street’s three major indexes to record closing highs, as investors grew confident the Federal Reserve will cut rates next week to support a weakening labour market.
The consumer price index (CPI) picked up to 3 per cent in September, accelerating from 2.9 per cent a month earlier, the Labor Department said in a statement. Prices rose 0.3 per cent month-on-month, both slightly below economists’ forecasts.
A significant reason for the increase came from the gasoline index, which jumped 4.1 per cent between August and September. The food index rose a modest 0.2 per cent.
Underlying "core" inflation, excluding food and gas, also came in below expectations at 3.0 per cent.
"It certainly is welcome news that we had a surprise on the downside, with shelter costs really helping us out," KPMG chief economist Diane Swonk told AFP.
But she warned that goods inflation had now increased for four straight months, while services inflation remained "somewhat sticky".
MARKETS CHEER COOLER DATA
Cooler-than-expected inflation data and strong corporate earnings lifted US stocks on Friday, with the S&P 500, Nasdaq and Dow Jones Industrial Average all closing at record highs.
"The benign CPI data opened the door for Fed rate cuts next week and likely in December," said Ryan Detrick, chief market strategist at Carson Group in Omaha.
According to preliminary data, the S&P 500 gained 0.79 per cent to close at 6,791.60, while the Nasdaq rose 1.14 per cent to 23,204.02. The Dow added 1.01 per cent to 47,206.94.
Third-quarter earnings season has also boosted sentiment, with 87 per cent of companies beating profit estimates and 83 per cent exceeding revenue forecasts, according to LSEG data.
Next week’s earnings roster includes Meta, Microsoft, Alphabet, Amazon and Apple, as well as Caterpillar and Boeing.
SHUTDOWN DELAYS DATA, BUT CPI PUBLISHED
The CPI report provided a rare set of official data, with most releases halted due to the government shutdown, now in its 24th day.
White House press secretary Karoline Leavitt praised President Donald Trump’s agenda for the “below-market expectations” data and blamed Democrats for the ongoing shutdown.
The CPI release was published to allow the Social Security Administration to calculate its cost-of-living adjustment for 2026. The agency said retirement benefits will rise by around US$56 per month starting in January.
FED RATE CUT WIDELY EXPECTED
Policymakers are widely expected to cut interest rates by 25 basis points next week, following September’s reduction that brought the Fed’s benchmark lending rate to between 4 per cent and 4.25 per cent.
The move comes amid growing concern about the labour market, with US job growth slowing to just 22,000 in August, according to the most recent available data.
Futures traders now see a 97 per cent chance the Fed will deliver the quarter-point cut, bringing rates to between 3.75 per cent and 4 per cent, according to CME Group data.
