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US Core Inflation Supports Higher-For-Longer Fed, According To Analysts

IRS Funding
President Joe Biden's Inflation Reduction Act, signed into law in 2022, has allocated a substantial $60 billion IRS funding over the next decade. (PHOTO: WirtschaftsWoche)

The rate at which underlying US inflation is increasing on a monthly basis supports central bankers’ claims that interest rates will need to remain higher for longer.

Excluding Food And Fuel

A 0.3% increase is anticipated for a second month in the consumer price index that excludes food and fuel, which economists believe to be a stronger reflection of underlying pricing pressures. The core CPI is expected to decline on an annual basis, but this is only due to base effects as the index surged significantly in September of last year, the most since 1982.

The world’s largest economy’s resilient demand, supported by unceasing job creation, has made it difficult for the Federal Reserve to get inflation down to its target level.

Price pressures are still present despite weakening, which is why Fed officials have been emphatic about the necessity for their benchmark rate to stay high for a considerable amount of time. The credit markets, where Treasury yields have recently increased, have responded favourably to this message.

The Fed’s September meeting minutes, which are coming on Wednesday, could provide insight into how strongly central bankers are leaning towards hiking interest rates once more before the year is up. On November 1st, the next policy choice is made.

This week doesn’t have any significant interest rate decisions planned because the International Monetary Fund and the World Bank are convening there for their annual meetings.

Increasing In Inflation

Three months after slipping below the 3.25% mid-point in June, economists anticipate that Brazil’s September inflation print will have exceeded the top of the central bank’s target range of 1.75% to 4.75% on Wednesday.

inflation

Source: Cbs news

The highlights in Chile include the trade balance for September, copper exports, and the results of the central bank’s survey of economists, while Colombia releases statistics on consumer confidence, retail sales, manufacturing, and industrial production.

Argentina publishes data on national consumer prices for September as the last significant economic announcement prior to its presidential election on October 22.

Although the monthly reading might drop below the three-decade high of 12.4%, the year-over-year print might surpass 135%. The central bank consulted with private economists who predict it will reach 169.3% in 2023.

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