Is US Inflation Really Retreating? Here’s What the Data Shows

According to the most recent information that was made available by the Bureau of Labor Statistics (BLS) at the time of writing, the Consumer Price Index, or CPI in short, grew by the same proportion in October as it did in September (i.e., +0.4 percent). The annual growth of inflation increased by 7.7 percent in October (after having increased by 8.2 percent in September). 

Since the period that ended in January 2022, last month was the period that had the least gain over the course of a year. Not to mention that the figure was lower than expected, which sparked optimism among analysts, investors and traders, propelling American indexes higher last week in their best daily gain in more than two years. 

If you’re an experienced and active trader, you know that CPI releases often trigger large upwards or downwards price movements that you can take advantage of over the short term if you’re using derivatives like Contracts for Difference (CFD). But remember to always choose a regulated and rapid CFD broker like Easymarkets with trading features that fit your trading strategy.

While investors are relieved by the latest CPI figures, is US inflation really retreating? 

Investors now have more optimism over the potential course of monetary policy in the United States. Since the Federal Reserve’s hard choices for the American economy seems to be beginning to pay off, there is a possibility that it may slow down the pace at which it raises interest rates by the end of the year. That’s at least what investors like to believe, which has boosted their risk appetite and supported American indexes last week. 

Worldwide indices also benefited from the news, as investors believe that worldwide monetary policy tightening will also soon show results in bringing down inflation, which might mean that the tightening of global credit availability will ease. But inflation is still climbing fast, reaching record highs and remaining far higher than the objectives set by the Fed and other developed nations (which are normally at around 2%). In addition, a consistent drop in rising prices over a period of several months is required before markets can speak of an actual lower trend.

That’s what Fed Governor Chris Waller and Fed Vice Chair Lael Brainard highlighted earlier this week. They emphasized that market participants should keep in mind that the Fed will not stop increasing interest rates, even though the latest data showed a slight slowdown in inflation from September to October. In order to win the war against rampant inflation, interest rates need to continue rising, although it is possible that they will do so at a more measured pace.
What should you expect from the markets? 

As a result, there is a good chance that market volatility will remain high, particularly if the newly released statistics turn out to be disappointing. This week, the American markets are likely to be influenced by a couple of inflation numbers like the PPI on Tuesday 15th, and the export and import prices on Wednesday. Various CPI reports for other countries are also scheduled this next week, such as from Europe, Canada, England, and Japan.