Will the Fed increase interest rates in December after the latest CPI numbers? This is what experts say
The latest Consumer Price Index figures indicate that inflation has slowed down. In light of this, the Federal Reserve is not likely to hike interest rates.
The Consumer Price Index report for October shows that inflation has slowed, although prices continue to go up. The CPI increased 3.2% for the year ending last month, lower than the 3.7% rate registered in September.
Numbers released by the Bureau of Labor Statistics show that this is the lowest annual rate since March 2021.
Inflation was flat from September to October
Prices did not change month-on-month for the first time since July 2022. Economists had projected a 0.1% increase from September, and a 3.3% rise from a year ago. The headline CPI had gone up 0.4% in September.
In view of these figures, the Federal Reserve is not expected to hike interest rates when it holds its next meeting on the matter on December 13. Rates are likely to stay at 5.25% to 5.5%, as the Fed may wait for the current interest rates to have an effect on further decreasing inflation.
The CME FedWatch Tool suggests that there is only a 1 in 20 chance that the Federal Reserve increases rates next month.
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October CPI report rallies stock market
The stock market reacted favorably to the October CPI report, bringing up the Dow Jones index by 1.5% or more than 500 points by the middle of the morning, while the S&P 500 increased by 2%. The Nasdaq rose by 2.3%.
Some Fed officials however have said the higher interest rates could still be possible in the future.
Richmond Federal Reserve Bank President Thomas Barkin said he is not sure if the central bank will still need to raise rates to be able to achieve its inflation objectives, although he admitted that there has been real progress on lowering prices.