New inflation data released on Wednesday showed consumer prices rose as predicted in Octoberwhich keeps the Federal Reserve on track to cut interest rates again in December.
“There is progress on inflation,” Claudia Sahm, chief economist at New Century Advisors, told Yahoo Finance after the release of the data. “We’re being pointed in the right direction, but it’s been a slow grind. And this is another month that fits into that slow grind.”
The outlook remains uncertain as economists warns of another potential inflation resurgence after the election of Donald Trump as the country’s next president.
Trump and his proposed policies were seen as potentially more inflationary because of the president-elect’s campaign promises of high tariffs on imported goods, tax cuts for corporations and restrictions on immigration.
Immediately following Wednesday’s release, markets continued to price in another 25 basis point rate cut in December after the central bank cut rates by that amount last week. Traders currently see a more than 80% chance the Fed will cut rates by 0.25% next month, up from just under 60% on Tuesday, according to data from CME’s FedWatch Tool.
“It is clear that the Federal Reserve’s work is still unfinished and that markets are correct in repricing federal funds rate expectations going forward,” wrote Raymond James chief economist Eugenio Alemán in a note to clients following the report.
“Under this environment, it is only oil and gasoline prices that keep inflation contained. That is, any increase in oil and gas prices could seriously harm the Fed’s inflation target. The Fed should be especially concerned about the services less energy component of CPI .”