investors look to key inflation data

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US Treasury yields fell on Tuesday as headline inflation figures showed a surprisingly soft change in prices last month.

The 10-year Treasury yield fell 18 basis points to around 4.45%. The 2-year Treasury yield fell more than 20 basis points to less than 4.9%.

Yields and prices move in opposite directions and one basis point equals 0.01%.

The October consumer price index was flat month over month, and up 0.2% as food and energy edged out the so-called headline CPI reading, the Labor Department said Tuesday.

Economists polled by Dow Jones had expected a monthly increase of 0.1% in CPI, and 0.3% in core CPI.

Core CPI rose 4.0% year over year, the lowest 12-month reading since September 2021, according to the report, a positive sign for the Federal Reserve’s efforts to reduce inflation by triggering a recession.

The report is a key data point for what may be on the horizon for interest rates. Questions about whether the central bank will raise rates further or prepare to cut them, and when that might happen, have increased in recent weeks.

After the report, the options market implied a 0% chance of a rate hike in December, and a slim 4.1% chance of a January hike, according to CME’s FedWatch Tool.

When the central bank met earlier this month, policymakers decided to leave rates unchanged, but did not take the option of further increases off the table. Just last week, Fed Chairman Jerome Powell reaffirmed the Fed’s 2% inflation target.

Various Fed officials are also expected to give comments on Tuesday that could inform investors about what the central bank might do next.

Elsewhere on Tuesday, euro zone gross domestic product data for the third quarter is expected and could provide insights into the economic state of the single currency area.

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