US inflation cools, sets stage for modest rate cut in November

US inflation sent mixed messages in September, as annual CPI fell to 2.4% from 2.5% in August, while the headline index crept up by 0.2%, according to the US Bureau of Labor Statistics. But core inflation, which excludes food and energy prices, rose to 3.3%, up from 3.2%, marking its first increase in 18 months. Analysts did not expect this and had predicted core inflation would hold steady, Bloomberg reports.

The reading indicates that inflation is “dying, but not dead,” CNN quotes Olu Sonola, Fitch Ratings head of US economic research, as saying.

While inflation is inching closer to the Fed’s 2% target, the latest reading indicates a more moderate path. “Anyone who thought the Fed would lower rates by another 0.50 basis points in November is dead wrong,” said Jamie Cox of Harris Financial Group. Instead, the Fed will likely cut rates at a slower, more “measured pace” Jamie Cox, managing partner at Harris Financial Group told Reuters.

The most probable outcome? A 25 bps rate cut in November, with December still up in the air, Sonola added.

Market reax: US futures dipped 0.35% on the news. The 10-year Treasury yield rose 2.9 bps to 4.096%, while the S&P 500 fell 0.2% during morning trading.

MARKETS THIS MORNING-

THE CLOSING BELL-

The ADX fell 0.3% yesterday on turnover of AED 893.4 mn. The index is down 3.4% YTD.

In the green: Aram Group (+14.6%), Fujairah Building Industries (+11.4%) and Foodco National Foodstuff (+10.5%).

In the red: Umm Al Qaiwain General Investment Co. (-3.8%), National Bank of Ras Al-Khaimah (-2.2%) and Gulf Pharma Industries (-1.8%).

Over on the DFM, the index closed up 0.3% on turnover of AED 288.2 mn. Meanwhile Nasdaq Dubai closed down 0.1%.