Renowned financial journalist Nick Timiraos, known as the 'New Fed Communication Agency,' wrote that the September CPI inflation report in the United States is a mixed bag of joys and sorrows, and the road to cooling inflation continues to be tough.

Timiraos pointed out that the September CPI report is the last CPI report before the 2024 U.S. presidential election, and one of the last important inflation reports people will see before the election. The challenge facing the Democratic Party in the United States is that while they hope to take credit from the significantly vibrant U.S. economy, they also have to deal with public discontent over rising prices.

The inflation rate in the United States has fallen to the level since President Biden took office. However, although the inflation rate has cooled down, it has not been warmly welcomed by many Americans because the prices of all commodities such as groceries, restaurant meals, housing, insurance, etc., are still far higher than they were four years ago.

The latest data highlights the above contradictions. The inflation rate continues to decline along a very uneven path, making it difficult for Federal Reserve officials and economists to fully believe that high inflation has been contained.

Thursday's CPI report is the first of three inflation data points that Federal Reserve officials will see before the next meeting. Timiraos stated that preliminary estimates show that the Federal Reserve's preferred inflation indicator, the core personal consumption expenditure price index, will have a lower increase in September than the CPI. On Friday, the U.S. Labor Department will release the September PPI data, with economists expecting a slight slowdown compared to August.

Timiraos cited the comment of Ryan Sweet, Chief U.S. Economist at the Oxford Economics Research Institute:

This is disappointing, but the process of declining inflation and moving closer to the Federal Reserve's target will be challenging.

There are some special cases, such as sports events and college textbook price increases.

Following the release of this CPI report, the inflation outlook has not really changed. The labor market does not seem to pose a significant upward risk to inflation.

Timiraos quotes Atlanta Fed President Bostic. Bostic stated that he had long expected economic data to exhibit monthly fluctuations, which could make identifying underlying trends complex. However, the latest data has not altered his expectation for the Fed to conduct a series of rate cuts next year:

I have always said that we should expect data to fluctuate - I have always used the word "unstable". We may occasionally receive unstable reports. But the question is, do they indicate a new trend?

Bostic voted in favor of a significant 50 basis point rate cut last month, and at that meeting, he expected further quarter-point rate cuts this year. Bostic's latest remarks on Thursday suggest that based on economic prospects, he believes it is reasonable to cut rates at both of the next two meetings this year, or at one of them, but recent mixed data indicate, "maybe we should pause easing in November. I am absolutely open-minded about this."

Investors expect the Fed to cut rates by a quarter point at the next meeting, after the Fed cut rates significantly by half a percentage point last month. The dot plot released at the September FOMC meeting showed that most officials expect two more rate cuts this year, each by a quarter point. The Fed has two more meetings this year.

Timiraos points out that investors have been reassessing the pace of Fed rate cuts as recent labor market data suggest the U.S. economy may be stronger than expected. Although investors still believe the Fed will cut rates at the remaining two meetings this year, they now think that the pace of cuts next year and the magnitude of the entire rate-cutting cycle will be smaller than expected a few weeks ago.

Also on Thursday, the U.S. Labor Department reported that the number of Americans filing initial claims for unemployment benefits rose to the highest level in over a year last week. While this may reflect the impact of Hurricane Helen, it also adds a warning to other data showing very low layoff levels. Following unexpectedly strong nonfarm payrolls released last Friday, the stock market rose.

Editor/Somer