Northwestern Mutual Wealth Management chief investment strategist Brent Schutte and Raymond James Washington policy analyst Ed Mills discuss the directions the market will take after the midterm elections on “The Claman Countdown.”
A high-stakes inflation report due Thursday should show that the fight to rein in stubbornly high consumer prices still has a long way to go.
The Labor Department releases the highly anticipated Consumer Price Index (CPI) report Thursday morning, offering a fresh look at October’s surge in inflation.
Economists expect the gauge, which measures a basket of goods including gas, health care, groceries and rent, to show prices rose 0.6% from the previous month, compared to 0.4% in September. On an annual basis, inflation is projected increased by 8%.
The report is expected to show underlying inflationary momentum as house prices and rents rise. Underlying prices, which exclude the more volatile food and energy measures, are expected to rise 0.5% from the prior month and 6.5% from the same period last year. .
FED’S WAR ON INFLATION COULD COST 1M JOBS
U.S. Federal Reserve Chairman Jerome Powell speaks during a news conference on interest rates, the economy, and monetary policy actions at the Federal Reserve Building in Washington, DC on June 15, 2022 . (Olivier Douliery/AFP via Getty Images/Getty Images)
While consumers have recently gotten some relief from inflation in the form of lower gas prices, the latest CPI reports will likely show that food and rent costs have risen. arrow. This is a worrying development, as higher housing and food costs most directly and harshly affect household budget.
“It is not just the continued pace of increase that is troublesome, but the pervasiveness of soaring prices across various expenditure categories that have scarred household budgets,” said Greg McBride, chief financial analyst at Bankrate.
The report will also have important implications for the Federal Reservewhich is tightening monetary policy at the fastest pace in decades as it tries to cool consumer demand and reduce runaway inflation.
In October, policymakers approved a fourth consecutive rate hike of 75 basis points, taking the federal funds rate to a range of 3.75% to 4% – well below restrictive levels – and indicated that further increases are to come.
The growing expectation on Wall Street is that the Fed will trigger an economic slowdown by raising interest rates at the fastest rate in three decades to catch up with runaway inflation.
“The chances of a soft landing are likely to diminish to the extent that policy needs to be tighter or tighter for longer,” Fed Chairman Jerome Powell said last month. “Nevertheless, we are committed to bringing inflation down to 2%. We believe that a failure to restore price stability would cause much greater pain.”
If the October inflation data is warmer than expected, that could increase the odds of an even steeper rate hike at the Fed meeting in December and a more aggressive central bank in the months ahead. come.
“Despite half a dozen interest rate hikes by the Federal Reserve, any broad-based, significant and sustained easing of inflationary pressures remains elusive,” McBride said. “As a result, Fed Chairman Jerome Powell said there is some way to go to raise interest rates to a level that dampens demand enough to contain inflation.”
A customer shops at a supermarket in Millbrae, California on August 10, 2022. (Li Jianguo/Xinhua via Getty Images/Getty Images)
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The Fed also monitors other economic indicators, including job growth and consumer inflation expectations. A potentially worrying sign, job growth is progressing at a steady pace, despite the central bank’s efforts to cool the labor market.
“We still have a long way to go,” Chairman Jerome Powell told reporters last week. “And incoming data since our last meeting suggests that the ultimate level of interest rates will be higher than expected.”
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