US Inflation Accelerates for the First Time Since March 

The US consumer price index (CPI) reversed directions and climbed higher in October, possibly a disappointment but certainly not a surprise. CPI rose to 2.6% year-on-year, up from 2.4%, matching the market estimate of 2.6%. This marked the first increase in annualized inflation in seven months. Monthly, CPI remained at 0.2%, in line with the market estimate. The core CPI rate, which excludes volatile items such as energy and food, was unchanged from September at 3.3% annually and 0.3% monthly, matching the market estimate.

The increase in inflation comes after the Federal Reserve delivered a jumbo rate cut of 50 basis points in September. The Fed followed up with a 25-basis point cut earlier this month, and the jump in headline inflation in today’s report has raised expectations that the Fed will cut again at the forthcoming December 18 meeting. The markets had priced in such a move at 68% just prior to the inflation release, but that has jumped to 75% currently, according to the CME’s FedWatch.

Today’s inflation report should serve as a reminder that although inflation has largely been contained, the battle is not over. Headline inflation has climbed to 2.6% and core inflation is running at 3.3%, above the Fed’s inflation target of 2%.

The recent US presidential election could have a dramatic impact on inflation. The incoming Trump administration represents an upside risk to inflation, as President-elect Trump has promised sweeping tariffs on imports from US trading partners, notably China and Europe. That would make goods imported into the US more expensive and raise US inflation, which would likely force the Fed to slow its pace of rate cuts.

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US Dollar Rises after Inflation Release 

Today’s inflation report has given the US dollar a boost against the major currencies. The AUD/USD currency pair climbed as much as 0.40% following the inflation report before surrendering about half of those gains.

• The US stock market has not yet opened today.
• Future markets are mixed ahead of today’s stock market trading.
• E-mini Nasdaq 100 Futures is down 26 points (0.13%) at 21,162 points.
• E-mini S&P futures is almost unchanged, with a gain of 1.75 points (0.029%) at 6014 points.

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