The rise in core consumer prices in the United States is expected to slow, bolstering predictions that the Federal Reserve will hold interest rates steady in October. However, overall inflationary pressures remain elevated, keeping the possibility of a rate hike in December on the table.
According to the International Financial Center, the Consumer Price Index (CPI) for September, set to be released on October 14, is anticipated to show a year-over-year increase of 3.7%, up from 3.4% in August. Month-over-month, the increase is expected to rise from 0.4% to 0.6%.
In contrast, the core CPI, which excludes volatile food and energy prices, is projected to see a month-over-month increase slow from 0.3% to 0.2%.
Market analysts suggest that recent inflationary pressures are becoming concentrated in specific industries or regions rather than spreading across the economy. Bloomberg Economics noted that current economic conditions differ from those in 2022 when the Fed began its rate hike cycle. If the upcoming inflation data aligns with expectations, it could support the outlook for a rate hold in October.
However, some experts caution against prematurely concluding the end of the Fed's tightening cycle. With inflation pressures remaining high, the likelihood of a December rate hike is assessed at 70.2% according to the CME FedWatch tool. This indicates that even if rates are held steady in October, there remains potential for further increases depending on future inflation trends.
In the bond market, concerns are also being raised about the risk of rising long-term interest rates, separate from the Fed's short-term rate decisions. Global asset management firm PIMCO warned that if technical factors and leveraged investors' sell-offs coincide, the yield on 10-year U.S. Treasury bonds could temporarily rise to 6%.
Signs supporting an increase in long-term rates are also emerging. Reuters recently reported that demand for hedging against rising rates has surged, leading to the highest level of volatility in interest rate options since March 2023. Additionally, the increase in corporate bond issuance by hyperscalers and expanded hedging on mortgage-backed securities could exert upward pressure on Treasury yields.
* This article has been translated by AI.
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