Finance News on October 11th (Editor Shi Zhengcheng): Just when the U.S. CPI data slightly exceeded expectations on Thursday, and the market unanimously agreed on the "interest rate cut of only 25 basis points next month," American monetary policymakers have once again played with investors' sentiment.

In the early hours of Friday Beijing time, well-known macro journalist Nick Timiraos, known as the 'mouthpiece of the Federal Reserve,' stated in an article that Raphael Bostic, a voting member of the FOMC of the Federal Reserve in 2024 and the President of the Atlanta Fed, expressed an open attitude on holding interest rates steady in the November meeting or only making a 25 basis point cut, depending on the development of the economic outlook.

Bostick said, "If the data indicates that it is appropriate, then I can totally accept skipping the next meeting."

Along with these remarks, CME's 'FedWatch' tool shows that the likelihood of no interest rate cut in November has risen from around 10% earlier to 20%.

(source: CME)

Investors who follow the US stock market are certainly aware that last week's unexpectedly strong non-farm data directly ruled out the possibility of the Fed implementing an additional 50 basis point interest rate cut this year. The CPI data released on Thursday further confirmed that the Fed does not need to rush to cut interest rates. The remaining suspense now only lies in whether the last two meetings of the year will each deliver a routine 25 basis point interest rate cut as scheduled.

Bostic further expressed on Thursday that interest rate cuts should not be taken for granted. He revealed that in the dot plot submitted at the September meeting, he only expects another 25 basis point interest rate cut for the remainder of the year. "This already indicates that if the data unfolds as I anticipate, I am willing to not take action at one of the last two meetings of the year," he emphasized.

Following the unexpectedly strong CPI data released on Thursday, Bostic also stated in a public speech: "For me, the volatility of this data (non-farm + CPI) suggests that we might need to 'pause' in November, and I am absolutely open to this idea. I believe we have the ability to exercise patience and let things evolve for a while... I think some factors in today's report validate this view.

In the September CPI report, although attention was focused on the continuous decline in housing inflation, food inflation rebounded, coupled with a sharp increase in transportation service costs (auto insurance fees) and rising prices of medical care products, leading to the core CPI rising for the 52nd consecutive month on a month-on-month basis, reaching the highest level since March of this year. This has also resulted in consumer prices rising by over 20% during the Biden-Harris administration.

Bostic stated that he is not surprised by the fluctuations in economic data across different months, as this should be expected. He said, "We may occasionally receive 'unstable' reports, but the question is, do they indicate a new trend?"

After a 50 basis point rate cut in September, the Federal Reserve's federal funds rate remained between 4.75%-5%. Bostic believes that the so-called neutral rate, which neither stimulates nor restrains economic growth, should be between 3%-3.5%, and he thinks the Fed will lower the rate to that level in the next year. Contrary to the ultimate target, the number of basis points cut at a single meeting is actually not important at all.

Bostic said, "This is a process of reaching a neutral interest rate, whether it is here to cut rates by 25 basis points or there to cut rates by 50 basis points, I think those things are not that important."

Editor/ping