September inflation will not generate more rate hikes than projected: Fed

St. Louis Fed President James Bullard said the stronger-than-expected September inflation report doesn’t necessarily mean the Fed has to raise interest rates more than projected. in the last meeting, but it does justify anticipating with steps of three quarters of a percentage point.

In an interview with Reuters, Bullard mentioned that the Consumer Price Index data published last week showed that inflation has become pernicious and difficult to stop, therefore “it makes sense that we move quickly”.

Following an estimated 75 basis point rise at the Nov. 1-2 meeting, Bullard added that while it’s too early to judge what will be done at the December meeting, “if it were today, I’d go ahead” with another $1 hike. three quarter points, which would be the fifth in a row.

The Fed has raised its interest rate by the same magnitude in its last three meetings, and two more three-quarter-point hikes by the end of the year would put its rate in a range between 4.50 and 4.75%, from the current 3 and 3.25 percent. hundred.

“I think 2023 should be a data-driven year. It is a risk with two faces. It is very possible that other data will force the committee to raise the rate, but it is also possible that there is a good disinflationary dynamic and, in that situation, the committee could keep the rate stable”.

The Consumer Price Index (CPI) stood at 8.2% annual in September. The data turned out to be the third inflationary decrease recorded by the United States in a row; however, it is one tenth more than the Fed had expected.

Consumers are more confident

On the other hand, consumer confidence improved at the beginning of the month, according to the University of Michigan. The index stood at 59.8 points, 2% more than in September.

The data is better than expected, given that analysts estimated that it would be 59 points. However, it is 16.6% lower than the same month last year.

“The index is 9.8 points above the historical minimum reached in June, but this improvement remains modest”, details the director of the survey, Joanne Hsu.