Investors Eye Fed Rate Cuts Amid Inflation Concerns

In Brief:

Investors may anticipate the Federal Reserve cutting interest rates by 25 basis points in November and December, despite potential upside risks in September's CPI data.

The September jobs report showed resilience in the labor market, aligning with the Fed's expectations and easing concerns over employment trends.

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Analysis: More Investors May Believe Fed Will Cut Interest Rates by 25 Basis Points

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According to a report by PANews on October 6, there is growing speculation among investors that the Federal Reserve will proceed with planned interest rate cuts of 25 basis points in both November and December. This anticipation comes despite potential upside risks in the upcoming U.S. September Consumer Price Index (CPI) data, particularly the core CPI.

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Recent economic indicators have shown mixed signals. The S&P Global Purchasing Managers Index indicated that corporate purchasing prices rose at their fastest pace in six months. Meanwhile, the ISM manufacturing survey reported a decline, but the non-manufacturing report confirmed accelerating price pressures. If inflation data reveals persistent stickiness, it could reinforce investor expectations of the Fed's planned rate cuts.

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Labor Market Resilience Supports Fed's Plans

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Jim Baird, chief investment officer at Plante Moran Financial Advisors, noted that the September jobs report provided optimism about the labor market's resilience, aligning with the Federal Reserve's goals. The report is not expected to alter the economic outlook but should alleviate concerns about employment trends.

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Earlier in the week, Fed Chairman Jerome Powell expressed his desire to avoid further weakening in the labor market. The Fed's decision to cut interest rates by 50 basis points last month was influenced by earlier hiring slowdowns and rising unemployment. With the labor market showing strength, the Fed may feel confident in proceeding with the anticipated rate cuts.

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