“El portavoz de la Reserva Federal”: La inflación se mantiene firme, pero no lo suficiente como para descarrilar el plan de recorte de tasas de la Reserva Federal en diciembre
El Departamento de Trabajo de EE. UU. informó el miércoles que los precios al consumidor subieron un 2,6% interanual en octubre. Esto marca un repunte en comparación con el mes anterior, cuando el índice de precios al consumidor aumentó un 2,4%. Los precios subyacentes, que excluyen alimentos y energía, subieron un 3,3%. Ambos resultados estuvieron en línea con las expectativas de los economistas encuestados por el Wall Street Journal. Inflation continues to decline on an imbalanced and bumpy path. The latest report may not be enough to prevent the Federal Reserve from cutting interest rates again in December. But the next meeting will spark a larger debate.
The latest article by Nick Timiraos, a renowned reporter for the Wall Street Journal and known as the "Fed's mouthpiece," is as follows.
Consumer prices in October slightly rebounded after posting their slowest growth rate in three and a half years last month, indicating that inflation continues on a bumpy and uneven downward path. The latest report may not be sufficient to prevent the Federal Reserve from cutting rates again in December. However, coupled with robust consumer spending and steady hiring, the strengthening of inflation might spark a larger debate among officials at their next meeting about whether to slow the pace of rate cuts early next year.
The U.S. Department of Labor reported on Wednesday that consumer prices rose 2.6% year-on-year in October. This marks a rebound compared to last month, when the consumer price index increased by 2.4%. Core prices, excluding food and energy, rose by 3.3%. Both results were in line with economists' expectations surveyed by the Wall Street Journal.
Investors have been preparing for inflation readings to exceed consensus expectations, regarding Wednesday's report as good news. Traders have increased their bets that the Federal Reserve will reduce rates by 25 basis points at its next meeting in December rather than holding steady.
Part of the positive reaction from investors to this report may stem from relief at the prospect that President Trump and the Federal Reserve will not engage in immediate confrontation. Trump has repeatedly called for rate cuts during his first term. Economists believe that some of the policies proposed by Trump, such as increasing tariffs, could push inflation higher.
This is the first report following the U.S. elections. During Biden’s administration, Americans have expressed disappointment over inflation, with current consumer prices about 20% higher than when he took office. Voters worldwide have punished leaders and ruling parties for high prices and inflation.
Although inflation is on a cooling trend, it coincides with a delicate period in the economy when Trump took office, and the Federal Reserve's goal is to lower rates to ensure a healthy and sustainable economic growth without reigniting inflation.
Evercore ISI's strategist pointed out on Wednesday: "The inflation data is somewhat hot, which may lead the market to start being less bullish about Trump's re-inflation policy."
Part of the reason for the rise in overall inflation rate is the more severe conditions compared to the same period last year. However, there has also been a significant price increase in some items last month. For example, after seasonal adjustment, the prices of used cars and trucks increased by 2.7% compared to last month, while ticket prices rose by 3.2%.
Despite the decline in rbob gasoline prices, energy prices remained flat compared to a month ago. This is because the decrease in rbob gasoline prices was offset by the increase in electrical utilities and henry hub natural gas prices. After seasonal adjustment, overall prices grew by 0.2% month-on-month in October. Core prices increased by 0.3%. These results also met expectations. Prior to the release of the inflation report, the futures market suggested that the probability of the Federal Reserve lowering interest rates at next month's meeting was about 60%. After the report was released, this probability rose to around 80%.
Despite some bumps along the way, inflation still appears to be on a cooling trend. In October 2023, overall consumer prices increased by 3.2% year-on-year. In June 2022, prices rose by 9.1% year-on-year, the worst inflation since the early 1980s.
Additionally, there remains a certain degree of "catch-up inflation" in the data. For example, auto insurance companies must negotiate with state regulators regarding price increases, so the surge in their costs takes time to be reflected in prices.
At last week's press conference, Federal Reserve Chairman Powell hinted that the Fed is prepared to respond to stronger-than-expected readings or "bumps." However, he noted that some price rigidity reflects lagged effects of previous increases rather than new sources of price pressure. For instance, in the consumer price index, rent increases remain at historically high levels, but the increases in rents for new leases have been quite moderate for over a year.
"This is just a catch-up issue. It doesn't really reflect current inflation pressures. It reflects past inflation pressures. Obviously, we are not declaring victory, but we feel that this is very consistent with the notion of inflation continuing to decline along a bumpy road," Powell said.
If Federal Reserve officials continue to lower interest rates in December, the focus may shift to the reasons that will prompt them to slow down the pace of rate cuts next year. Several officials indicated on Wednesday that they want to avoid lowering the rates too much to prevent being forced to reverse their policy again.
Most of them believe that the current short-term interest rate level is restrictive, which means that without further rate cuts, the labor market may continue to cool down and even pose a risk of recession for the economy.
Officials hope to adjust interest rates back to a more 'neutral' level, one that neither stimulates nor slows down economic growth, but they do not know where that level is. Before the 2008-09 financial crisis, many believed the neutral rate could be around 4%, but after the crisis, the economic recovery was extremely slow, and economists and Federal Reserve officials believe the neutral rate could be closer to 2%.
Alberto Musalem, president of the St. Louis Fed, told reporters on Wednesday that the Fed may gradually lower interest rates to the neutral level. He said, 'The strength of the economy may provide space for a gradual easing of policy without rushing to find the position of the neutral rate.'
Lorie Logan, president of the Dallas Fed, stated during a speech on Wednesday that she expects more rate cuts will be necessary, but she also indicated that there are some signs suggesting that the Fed may have already approached the neutral rate that has risen in recent years.
She likened the work of the Fed to that of a captain, stating that when the ship approaches the shore, the captain must avoid mistaking water for mud. She said, 'In these uncertain but possibly shallow waters, I think it is best to be cautious.'
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Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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