U.S. inflation ticked higher in October, but stable core price pressures and tame month-on-month gains prompted a sigh of relief on Wall Street and likely supported bets for an end-of-year interest rate cut from the Federal Reserve.
The Commerce Department said Wednesday its headline Consumer Price Index for October was pegged at an annual rate of 2.6%, accelerating from the 2.4% pace recorded in September and reaching the highest since July. The headline tally matched Wall Street forecasts.
On a monthly basis, price pressures edged 0.2% higher, matching last month’s advance, thanks in part to a modest 2.3% decline in domestic gasoline prices.
So-called core inflation, which strips out volatile components like food and energy, held at an annual rate of 3.3%, matching Wall Street’s 3.3% forecast and pegged at the lowest rate in more three years.
The monthly reading of 0.3% was also in line Wall Street forecasts and was up modestly from the final July reading of 0.2%.
Markets continue to expect that the Fed will lower its benchmark lending rate at its final meeting of the year next month, but have pared bets on further reductions into 2025.
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U.S. stocks reversed declines following the data release, with futures contracts tied to the S&P 500 suggesting a 15-point opening-bell gain and those linked to the Dow Jones Industrial Average priced for an 87-point bump. The tech-focused Nasdaq, meanwhile, is called 45 points higher.
Benchmark 2-year Treasury note yields eased 3 basis points to 4.296% while 10-year notes fell 5 basis points to 4.381%.
The U.S. dollar index, which tracks the greenback against a basket of six global currencies, was marked 0.06% lower at 105.961.
CME Group’s FedWatch, meanwhile, suggests a 62% chance that the Fed will lower its benchmark lending rate by a quarter of a percentage point next month in Washington, down from around 85% in late October.
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