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Investors and traders are focused on the US CPI inflation report for the month of October which is due to be released later in the day.

With the US dollar gaining ground after the presidential elections and the probability of a rate reduction in December lowered to 62%, economists will scrutinise the report in order to figure out how the Federal Reserve could adjust its monetary policy in the next months.
 

US CPI Inflation October 2024

Just some days after Donald Trump’s victory in the presidential elections where inflation was one of the main debate topics, the US Bureau of Labour Statistics (BLS) will release the October CPI report. Economists forecast that headline CPI inflation rose by 2.6% on an annualised basis in October, surging when compared to September’s figure. Monthly inflation is expected to come in at 0.2%, matching the previous month’s reading. Core CPI will likely come in at 3.3% on a yearly basis, remaining on hold.

Federal Reserve Bank of Minneapolis President Neel Kashkari said he wouldn’t want to declare victory on inflation but noted that there was a good reason for confidence, adding that “if inflation surprises to upside before December, that might give us pause.”

Federal Reserve (Fed) Bank of Richmond President Tom Barkin suggested that “inflation might be coming under control or might risk getting stuck above the Fed's 2% target.” Barkin said that “the Fed has started the process of recalibrating interest rates to somewhat less restrictive levels.”
 

Japan’s Wholesale Inflation Rose In October

According to data released, Japan's wholesale inflation increased in October at the fastest annual pace in the last year as the weaker yen made import costs surge for some products.

The Bank of Japan (BoJ) announced that the corporate goods price index (CGPI), which measures the price that businesses charge each other for goods and services, rose 3.4% in October on an annualised basis, surpassing market forecasts for a 3.0% surge.

The report showed that companies remained under pressure from rising raw material costs, which could push inflation upwards. Economists said that the report’s figures may push the central bank to hike rates in December.
 

Ex-Fed Mester Sees Less Rate Cuts In 2025

Loretta Mester, an ex-member of the Federal Open Market Committee (FOMC) said that the Fed will likely proceed with less than forecast rate cuts during next year. Speaking at a bank conference in the UK, Mester said: “Next year, the pace of the cuts will be affected by where they’re seeing fiscal policy. My own view is the market is right, they’re probably not going to have as many cuts next year as was assumed or expected in September.”

According to Mester’s forecast, the Fed could cut rates in its December 2024 meeting but is likely to proceed with less than four reductions next year. The ex-President and CEO of the Federal Reserve Bank of Cleveland, who prefers the “hawkish” approach, also mentioned that the US central bank could have a better economic picture after the first months of 2025 when new policies by the Trump administration would be introduced.

 Mester noted that “It’s not just going to be tariffs. There are things going on immigration, there’s probably going to be things going on the tax side, and there’ll be spending also. All of those together are going to have to inform — ‘has the outlook for the U.S. economy changed?”

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