Wall Street had hoped the Fed might be able to ease its attack on inflation later this year. This hope was definitively dashed on the 13th. The U.S. consumer price index (CPI), released Wednesday, posted better-than-expected gains in September, pushing the core index, which excludes volatile food and energy, to a 40-year high.
Here’s what market players think:
Andrew Brenner, Head of International Fixed Income, NatAlliance Securities:
A horrifying CPI figure. Will the Fed raise interest rates by 100 basis points (bp, 1bp = 0.01%)?
Seema Shah, Chief Global Strategist, Principal Asset Management:
No one in the market believes that November’s Federal Open Market Committee (FOMC) meeting can raise interest rates by less than 75 basis points. In fact, if such an upside surprise is repeated next month, there is a possibility that a 0.75 point rate hike will be decided for the fifth consecutive meeting in December. If that happens, policy rates will exceed the Fed’s forecast of peak levels by the end of the year.
Steve Ciabalon, Senior Portfolio Manager, Federated Hermes:
The data raises the risk that the headline CPI will hit another cycle peak before the end of the year. With oil prices in the mid-90s in December, headline CPI could outperform June’s high of 9.1% from a year earlier as energy prices rise again.
James Ashey, Investment Director, Aberdeen Asset Management:
The CPI data is not what the markets and the Fed wanted. Inflationary pressures remain stubbornly high, although there has been some softening in sectors particularly affected by the COVID-19 crisis. While this will support bond yields and the dollar, there is more bad news for stocks.
Original title:‘Horrible CPI’ Has Some Brace for Jumbo Hike: Wall Street Reacts(excerpt)