Daily Market Color October 10, 2024Markets Largely Shrug Off Hotter-Than-Expected Inflation Rates fall despite relatively elevated September CPI. The short end of the swap curve closed ~6bps lower today despite higher-than-expected CPI in September. Most of the move occurred in the immediate aftermath of the data release as 2-year and 3-year rates plummeted ~10bps from intraday highs. Jobless claims data largely contributed to the move as the 258k print exceeded the 230k forecast. Fed officials also drove the rate decline as John Williams, Austan Goolsbee, and Thomas Barkin argued that inflation is still headed in the right direction. CPI exceeds forecasts in September. Prices rose more than expected in September according to today’s CPI (consumer price index) print. Month over month, headline CPI climbed 0.2% vs. 0.1% estimates, and core CPI rose 0.3% vs. 0.2% estimates. On a yearly basis, headline inflation was 2.4% vs. 2.3% estimates (slightly lower than August’s 2.5% result), and core inflation accelerated vs. expectations of no change from August, climbing from 3.2% to 3.3%. In response, Fitch head of US economic research Olu Sonola said, “Inflation is dying, but not dead…this report encourages the Fed to maintain a cautious stance with the pace of the easing cycle.” PPI is expected to show slowing inflation. Producer price growth is expected to decline across most measures in September. Headline PPI is forecast to slow by 0.1% monthly and annually while core PPI is expected to fall to +0.2% month-over-month. On the contrary, annual core PPI is expected to accelerate by 0.2% to +2.6%. Based on today’s market reaction to CPI, it is unlikely that slightly elevated PPI would materially shift rate cut expectations.
