The U.S. CPI in September was lower than expected, and the market expects the Fed to continue cutting interest rates next week.

On Friday, the U.S. released the September Consumer Price Index (CPI) due to the fall in inflation data, and investors were optimistic that the data cleared the barriers for the U.S. Federal Reserve to continue its interest rate reduction path and supported higher valuation levels in the stock market. On the same day, the three largest U.S. stock indices reached a new record high, with the line up 1.01%, breaking 47,000 points for the first time in history, and the SP500 index up 0.79%, and the index up 1.15%.

Because of the market's expectations for the Federal Reserve's interest rate reduction to warm up, bank stocks have strengthened, with JPMorgan, Rich Country Bank and CIB Group share prices rising by more than 2%, the price of U.S. Bank stocks rose by 1.56%.

According to data released by the U.S. Department of Labor on 24 September, the U.S. Consumer Price Index (CPI) increased by 3 percent, the core CPI increased by 3 percent, and the two data were less than expected. The price of gasoline increased by 4.1 percent, which is the biggest price increase in September, the overall price of commodities increased by 0.5 percent; the price of housing increased by 4.6 percent, compared with 0.2 percent, which accounted for about a third of the weight of the CPI; the price of services compared to housing expenses also increased by 0.2 percent; in addition, the price of new cars increased by 0.8 percent, but the price of second-hand cars and trucks fell by 0.4 percent.

After the U.S. CPI data was released, traders increased their stakes on the U.S. Federal Reserve to lower interest rates twice this year.Future contracts linked to the U.S. Federal Reserve policy interest rates also show that market expectations for further interest rate cuts on the U.S. Federal Reserve at the next January meeting are also heating up.

Minsheng Securities believes that core inflation in the United States is expected to continue its moderate upward trend in September, which also means that the market's basically priced interest rate cut expectations in October are difficult to reverse. In the short term, the Fed's balance of job market risks has temporarily exceeded inflation. Recently, Powell has repeatedly emphasized that the labor market is showing more and more signs of weakness. Even in the absence of government data during the shutdown, the downside risk of employment has obviously increased. At least at the current point, moderate inflation leaves room for the Fed to cut interest rates in October, which may give priority to alleviating employment problems.

The International Monetary Fund (IMF) expects U.S. inflation to pick up starting in the second half of 2025, as the impact of tariffs will no longer be absorbed by supply chains, but will eventually be passed on to consumers. However, the IMF still predicts that the U.S. inflation rate is expected to return to the Federal Reserve's 2% target in 2027. But this forecast assumes only a moderate second-round effect on trade tariff effects, which means that there is a potential upside risk to U.S. inflation at current baseline forecast levels while employment faces downside risks.

Source: China Economic Network WeChat Comprehensive Central Vision Financial Economy WeChat, Securities Times WeChat