U.S. inflation is expected to continue rising on a monthly basis, confirming central bank policymakers’ beliefs that interest rates will need to remain higher for longer. The consumer price index, excluding fuel and food, is expected to rise by 0.3% for a second month. The U.S. labor market has also remained strong, thereby contributing to resilient inflation in the country.
September’s jobs report came in much stronger than expected, with more than double the amount of payrolls added than initially expected. Still, Bloomberg Economics does not believe that this data will seal the Federal Reserve’s next interest rate policy decision.
“The blowout September jobs report didn’t settle the debate about whether the Fed is done hiking rates,” Bloomberg observed. “Two critical upcoming economic indicators — CPI and the University of Michigan consumer-sentiment survey — may give a more definitive read. We expect September core CPI inflation to come in somewhat higher than consistent with the Fed’s 2% mandate, while higher gasoline prices may have pushed up short-term inflation expectations in the preliminary UMichigan survey for October.”