Inflation report – It doesn’t do much to calm wall street

Despite the fact that the overall tune has remained the same, Wall Street is anxiously awaiting this morning’s announcement of the consumer price index for September,2022.

Inflation report

Analysts anticipate that the headline inflation rate will moderate somewhat (to 8.1% from 8.3%) while “core” inflation, which excludes food and energy, will slightly increase (to 6.5% from 6.3%) in the data release at 8:30 a.m. ET.

The average investor does not require to be informed of the true figures because they are likely to continue showing a decades-high in product prices.

Investors, however, who are utterly fixated on the data points that matter most to the Fed, pay attention to the details. Small beats or misses on the headline data, as we saw in 2022, can shift the entire stock market by 3%, 4%, or even 5%.

Fed anticipated to raise interest rates

The key indices (DJI, IXIC, GSPC) are perilously balanced at or near the lowest rate in two years, which only serves to increase the potential for volatility. The bond and currency markets are currently unstable and illiquid, so investors have their work cut out for them.

Market participants are anticipating the Federal Open Market Committee meetings on November 1 and 2, where the Fed has anticipated to raise interest rates by 75 basis points for the fourth straight meeting.

Investor’s anticipation – additional 50 bps price

The key indices (DJI, IXIC, GSPC) are perilously poised at or near the lowest levels in two years, which only serves to increase the potential for volatility. The bond and currency markets are currently unstable and illiquid, so investors have their work cut out for them.

Market investors are anticipating the Federal Open Market Committee meetings on November 1 and 2, where the Fed is anticipated to raise interest rates by 75 bps for the 4th successive meeting, with an additional 50 bps priced for the December meeting.

Fed’s minutes

The Fed’s previous September meeting notes, which were made public on Wednesday, confirmed expectations that it will loosen its ferocious rate hike pace by year’s end. It would be crucial to evaluate the rate of any policy tightening, according to Fed experts, in order to reduce the danger of severe negative repercussions on the prospect for the economy.

To put it another way, the Fed will raise rates until something breaks, but it will aim to avoid doing too much long-term harm to the economy.

The minutes showed that many Fed officials were more worried about the risk of taking too little action to lower inflation than they were about taking too much action, which effectively shattered any hopes for dovish undertones regarding the near-term.

Federal Reserve statements

The Federal Reserve has often said in a straightforward manner that it is de facto manufacturing a recession with greater unemployment rates and a slowing economy in order to fight inflation. “Participants judged that a softening in the labour supply would be needed to relieve increasing pressures on salaries and prices,” the minutes state.

This is true despite the fact that there is ample evidence that the Fed’s policies are already favouring the wealthy over the poor. According to the minutes, spending is holding up “pretty well, notably among higher-income households.” The minutes also stated that low-to-moderate income people are reducing discretionary spending and “moving to lower-cost options.”

Central bank involvement to support the yen failed

In comparison with its central banker peers in the U.K., where monetary and fiscal policies are splitted and at odds, or in Japan, where central bank involvement to support the yen failed in less than 3 weeks, officials there are doubling down on ultra-loose monetary policy, investors may find some relief in the Fed’s consistency with its messaging and holding the line.

For American investors, the key issues are when, not if, the Fed hits its own threshold and where the markets stand at that crucial moment.

SUMMARY –

The September consumer price index will be released this morning, and Wall Street is anticipating it with bated breath. Analysts predict a slight easing in the headline inflation rate. The major indicators (DJI, IXIC, GSPC) are dangerously positioned at or close to the lowest levels in the previous two years. The minutes from the September meeting of the Federal Reserve reveal that decision-makers were concerned about acting too slowly to reduce inflation. The minutes state that expenditure is “quite well, particularly among higher-income households.” People with low to moderate incomes are “shifting to lower-cost options” and cutting back on discretionary expenditure.