FX168 Financial News Agency (Asia Pacific) Bloomberg quoted forecasters as predicting that the US Consumer Price Index (CPI) for October, to be released later on Wednesday (November 13), may show strong basic inflation for the third consecutive month, raising doubts about the pace of future rate cuts by the Federal Reserve.

According to Bloomberg's median estimate, the so-called core Consumer Price Index, excluding food and energy, is expected to rise by 0.3% in October, while the overall index is expected to increase by 0.2%. The US Bureau of Labor Statistics is scheduled to release the CPI report later on Wednesday.

Such data will leave Federal Reserve officials uncertain about whether they should continue cutting rates at the next policy meeting in December. They had previously cut rates by 50 basis points in September and another 25 basis points last week. Investors have reduced the likelihood of a rate cut in December from around 80% before last week's presidential election to around 60%.

(Source: Bloomberg)

Bloomberg economist Scott Johnson said in a report on Tuesday, "October US CPI inflation data may weaken expectations of a rate cut by the Fed in December. Bloomberg's economic forecast shows that there are upside risks in overall monthly inflation data, while core inflation rates seem to remain at relatively high levels."

The following are key sections to pay attention to in the report:

Rent

As the largest single component of CPI, owners' equivalent rent is crucial for determining the basic trend of the index. OER inflation accelerated in July and August, leading to concerns that the slowdown in the first half of the year would be overturned, and then slowed again in September.

Economists at Morgan Stanley, led by Diego Anzoategui, believe that the October report may see a small increase again, followed by a resumption of the downward trend.

In a preview of the November 8th report, Anzoategui and colleagues wrote, 'OER in September may show a downward trend due to seasonal factors, and we do not expect a similar trend this quarter. However, new lease and renewal inflation rates (a leading indicator in our model) remain below housing CPI, indicating a continued slowdown in the future.'

Lodging prices

Even if rental inflation remains stable, housing prices will rise due to the impact of hurricanes Helen and Milton, which may lead to a significant increase in the lodging category in the index as people along the storm path flee to hotels elsewhere.

Analysts also point out that the U.S. Bureau of Labor Statistics has seasonally adjusted the project to account for the business slowdown after the peak summer tourism season, meaning that unadjusted prices must drop significantly to reflect a seasonally adjusted reading decline.

Economists Pooja Sriram and Marc Giannoni at Barclays stated in their November 7th report, 'Based on high-frequency data on average home prices, we predict that non-household lodging prices will rise. Costar's weekly reports indicate that demand and occupancy rates in the Southeast will increase in October due to displacement caused by hurricanes and considering the daunting seasonal factors of October.'

Used cars

Hurricanes may have also driven up the prices of used cars, which is one of the most important categories in the index commodity basket. This category's Therefore, events like the 9/11 attacks, the COVID-19 pandemic, and the Russia-Ukraine conflict have all driven significant increases in the price of gold, as investors seek stability during turbulent times.Causing core commodity prices to overall decline in 14 out of the past 16 months. Excluding used cars, the performance of core commodity prices has been mixed, with declines occurring in only 9 out of the past 16 months.

Wells Fargo & Co economists Sarah House and Aubrey Woessner stated in their November 7 report preview: "Recent rebound in used car auction prices indicates that the used car CPI may see the largest monthly increase in about a year."

They wrote: "We still believe that the benefits of a smoother supply chain and cooling demand have not yet fully materialized, but the deflationary impact from new and used cars may gradually fade in the last few months of this year - especially as the damages from hurricanes Helen and Milton increase the demand for replacement vehicles and parts."