Caixin October 11th news (Editor Xiao Xiang): After a Federal Reserve voter expressed the view of skipping the rate cut next month, the Fed's interest rate meeting in November is becoming increasingly unclear.

For Wall Street traders, Thursday was undoubtedly quite a dramatic day:

First, the unexpectedly higher-than-expected U.S. CPI data for September initially caused some alarm, but at the same time, the unexpectedly sharp rise in initial jobless claims released at the same time created a confusing signal between employment and inflation data, causing traders to increase their bets on a 25 basis point rate cut by the Fed at the next meeting in the first instance.

Subsequently, the successive statements from Fed officials further muddied the already murky waters of the market. Although New York Fed President Williams, Chicago Fed President Evans, and Richmond Fed President Barkin all downplayed the rise in inflation data that day, Atlanta Fed President Bostic, who was not particularly hawkish to begin with, stated, "Recent mixed data suggests that maybe we should pause rate cuts in November. I am absolutely open to this."

Of particular note is the fact that Bostic's speech was actually drafted and released by "Fed's mouthpiece" reporter Nick Timiraos personally.

From the pricing of the interest rate futures market, after this series of economic data and central bank officials' speeches, market traders further reduced their estimate of the rate cut magnitude for the remainder of the year to about 44 basis points. Particularly after Bostic's hawkish speech, the market's expectation of the Fed standing pat in November briefly rose to around 25%, but after the market closed that day, the related probability fell back below 20%.

In response, Jack Ablin, Chief Investment Officer at Cresset Capital in Chicago, said, "Investors on Thursday were torn between a higher-than-expected CPI report and a weaker-than-expected initial jobless claims report: one report showed a higher-than-expected inflation rate, while the other indicated worse-than-expected economic conditions. It's the worst case scenario for both aspects."

The market's hesitant attitude is also evident from the trend of US Treasury yields: US Treasury yields with various maturities fluctuated on Thursday, with both rises and falls. By the end of the New York session, the 2-year US Treasury yield fell by 6.6 basis points to 3.964%, the 5-year US Treasury yield fell by 3.4 basis points to 3.89%, the 10-year US Treasury yield rose by 0.20 basis points to 4.0746%, and the 30-year US Treasury yield rose by 1.4 basis points to 4.36%.

Of course, even though there was a slight decline in the closing session, the 10-year US Treasury yield once reached a high of 4.10% intraday, setting a ten-week high.

Some market analysts believe that the latest inflation report, coupled with last Friday's strong September employment report, may support calls for the Fed to take more gradual action in the coming months. As for the initial warnings issued, given the short-term impact of hurricanes and strikes, there may be some noise...

Data released by the US Department of Labor on Thursday showed that in the week ending October 5, the number of Americans applying for state unemployment benefits increased by 0.033 million without seasonal adjustment, reaching 0.258 million after seasonal adjustment, the highest in over a year. Part of the reason is the impact of Hurricane Helen and dockworkers' strikes, with Michigan and other states affected by hurricanes seeing a significant increase in unemployment benefit applications.

The simultaneously released inflation report shows that in the US, the CPI rose by 0.2% month-on-month and 2.4% year-on-year in September; the core CPI index rose by 0.3% month-on-month and 3.3% year-on-year, all four sets of data exceeded market expectations.

Peter Cardillo, Chief Market Economist at Sparta Capital Securities, said, "I think the decision of the Fed to cut interest rates by 50 basis points in September was a bit hasty. If you look at the meeting minutes, you will see that there is definitely disagreement on this point. I don't think the market will collapse, but Thursday's CPI inflation data may erode positive market sentiment."

Cardillo pointed out, "The inflation figures are hotter than we expected, perhaps the downward trend in inflation is stalling, and we should not expect to see a decrease in inflation in the next two to three months. The annual core inflation rate is rising, which is disappointing. This is not terrible news, but certainly not good news, it indicates that the best time for inflation to fall may have passed. This also indicates that the Fed will not be as aggressive as previously imagined. From now until the end of the year, the Fed may only cut interest rates once, and in December, as the Fed will proceed slowly."

Victoria Fernandez, Chief Market Strategist at Crossmark Global Investments, also stated that the latest inflation data suggests that the Fed may not be able to fully control price pressures. This indeed gives people some market space, perhaps to bet on rising yields at the short end of the bond market.

Stephanie Roth, Chief Economist at Wolfe Research, pointed out that the latest data may lead some Federal Reserve officials to consider pausing rate cuts, depending on subsequent data performance. Roth said, "I don't think today's data will change much. We expect the Fed to cut rates at every meeting for the rest of the year, but if the labor market and inflation data continue to follow the current trend, they are likely to switch to cutting rates every other meeting."

Editor/ping