“American inflation surprised on the rise for the second consecutive month, in September,” notes Xavier Chapard, strategist at La Banque Postale AM. The latter also reports that underlying inflation accelerated unexpectedly, recording its first increase since the first quarter.
“Above all, unlike the previous month, the upward surprise on inflation is generalized and particularly affects the price of services excluding rent, the indicator closely monitored by the Fed to judge domestic inflationary pressures” underlines the specialist. “While inflation in services excluding rents had finally slowed this summer, it rose again in September, close to 5%, compared to less than 3% before Covid.”
According to the asset manager, the September inflation figures, in addition to those on the job market, are therefore more problematic for the medium-term inflation outlook and therefore for the Fed. Especially since the minutes of the last Fed meeting show that, if all the members of the Fed were in favor of a first rate cut in September, some would have preferred a more limited cut (25 basis points rather than 50 points ).
For Xavier Chapard, the question for the markets is no longer whether the Fed will lower by 25 or 50 basis points in November, but whether or not the Fed will lower its rates during this meeting.
“We continue to believe that the Fed will cut rates by 25 basis points in November and December, because rates are still clearly in restrictive territory. And because hurricanes and strikes risk weighing on activity and “short-term employment. For the first time since August, the market does not anticipate lower rates compared to our expectations” explains the strategist.
