Inflation Slows, Markets Rally
Wall Street rallied Friday after the latest Consumer Price Index (CPI) report showed slower-than-expected inflation, reinforcing investor expectations that the Federal Reserve will move forward with interest rate cuts.
The S&P 500 surged 1% to close above 6,800, setting a new all-time high as traders cheered the benign data and bet on further policy easing before year-end.
CPI Data Supports Rate Cut Outlook
The core CPI—which excludes food and energy—rose 0.2% in September, bringing the year-over-year increase to 3%, its slowest pace in three months.
Economists and fund managers said the data removes a key obstacle for the Fed to proceed with a rate cut at next week’s meeting, with a second cut likely in December.
“There was little in today’s benign CPI report to spook the Fed,” said Lindsay Rosner of Goldman Sachs Asset Management.
Fed Expected to Ease Further
With the government shutdown disrupting access to federal economic data, traders have leaned on private indicators and CPI to gauge the outlook. The Fed’s dual mandate—price stability and full employment—has kept policymakers focused on softening labor data even as inflation remains above target.
“As long as data signal more risk to employment than inflation, we’re likely to see more easing,” said Glenmede’s Jason Pride.
Treasury and Dollar Response
- Two-year Treasury yields slipped to 3.48%, signaling bond markets agree with the dovish outlook.
- The U.S. dollar remained flat as investors adjusted positions on future rate expectations.
Broader Economic Uncertainty
Despite market optimism, the White House warned that October inflation data may not be released due to the ongoing shutdown. This uncertainty has left analysts eager for any data that brings clarity.
“At a time when economic data is sparse, investors will take any clarity they can get,” said Bret Kenwell of eToro.
Key Market Insights
- S&P 500: +1%, closing above 6,800
- Core CPI YoY: 3.0%
- Treasury 2-Year Yield: 3.48%
- Fed Watch: Rate cuts expected in October and December
Related Coverage
- Economy & Market – https://idahonews.co/economy-market/
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