Inflation jitters and rate cut riddles | MarketTalk: What’s up today? | Swissquote

Show notes

Investors are on the edge of their seats, waiting for the latest scoop on US inflation data to take a fresh direction in both stock and bond markets. According to the consensus of analysts’ estimates on a Bloomberg survey, the US inflation may have slowed to 3.3% last month, from 3.7% printed a month earlier. Core inflation is seen unchanged at 4.1%. An uptick in health insurance costs could give a slight boost to October inflation figures, while the latest US consumer survey, released last Friday, showed that the US consumers expect inflation to climb at an annual rate of 3.2% over the next 5 to 10 years.
Today, an inflation read in line with expectations, or ideally softer than expected, should give further support to the Federal Reserve (Fed) doves, cement the idea that the Fed is done hiking the interest rates and boost the rate cut expectations for next year. A read above expectations should bring Fed hawks back to the market and increase the bets of a rate hike in December. But activity on Fed funds futures gives around 85% chance for a no rate hike in the Fed’s December meeting, and the inflation numbers must look very bad to reverse that expectation.
And anyway, what investors are interested in right now is not whether the Fed will hike one more time or not – because they are convinced that it won’t. Instead, what everyone is trying to figure out right now is: when will the Fed start cutting rates, and by how much it will cut rates next year.
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