US consumer prices rose markedly weaker than expected, sparking excitement in financial markets. A rise in weekly jobless claims also added to the picture of a weakening economy, reviving speculation that the Fed will slow down tightening soon.
The consumer price index for October rose 0.4%, slowing the annual growth rate to 7.7% from 8.2% a month earlier and stronger than expected at 7.9%. The core index (without energy and food) added 0.3% last month, slowing from 6.6% to 6.3% against expectations of 6.5%.
The weak inflation data takes speculators' fears off the radar that the Fed will make another 75-point hike and that the key rate will exceed 5% in this monetary cycle. Before this, for more than a year, we have only seen an apparent tightening of the tone time after time. However, the neat reversal of official commentary rhetoric has been given a firm footing in subdued inflation.
It won't be right to tune in to an imminent rate cut or a pause in rate hikes, but slowing the pace is big news for markets strangled by Central Bank policy. And they are now able to breathe more freely.