BOC International: Although US inflation in September exceeded expectations, it still supports slight interest rate cuts

The Zhitong Finance App learned that according to a research report released by BOC International, the US CPI increased 2.4% year on year in September, but was 2.3% lower than expected, 2.5% last month; CPI increased 0.2% month-on-month in September, higher than expected 0.1%, and 0.2% last month; core CPI rebounded to 3.3% year on year in September, a new high since June and 3.2% last month; core CPI was 0.3% month-on-month, also higher than 0.2% last month.

BOC International believes that overall inflation in the US continues to slow, causing the market to increase its bet on cutting interest rates by 25 basis points in November. The implicit interest rate reduction forecast for interest rate futures shows that the market price will cut interest rates by 25 basis points in November is 86.3%, compared to 77.6% before the data, while the probability of not cutting interest rates in November is 13.7%, compared to 22.4% before the data.

Although nominal and core inflation in September exceeded market expectations, there were no major surprises. Combined with resilient employment data for September, the market's previous expectations for a sharp 50 basis point interest rate cut in November have been completely revised. The November interest rate cut was the basic situation. This is also consistent with the median bitmap of the Federal Reserve's September interest rate meeting.

The bank pointed out in the September non-farm payroll report that due to the bumps in the new non-agricultural employment data, new jobs are uneven, mainly concentrated in a few service sectors, and wage data for most industries has weakened. Meanwhile, the recent strike and the impact of the southern US hurricane disaster may all affect employment and economic activity. The bank maintained its judgment of cutting interest rates by 25 basis points in November.