Investors are betting the Fed has come to the end of its rate-hiking cycle, and are looking to today's key September inflation reading for full confirmation.
The Commerce Department will publish its first estimate of September inflation Thursday with investors looking for confirmation that recent Fed rate signals, as well as a sharp pullback in Treasury bond yields, suggests muted price pressures over the coming months.
Markets are likely to focus on the core reading, however, given that the Fed has indicated it is far more reflective of both the pressures Americans face in their day-to-day spending and, as a result, is often connected to wage increases that can engender feedback loops that keep prices elevated. A modestly faster-than-expected reading for producer prices yesterday, which showed factory gate inflation 0.5% on the month and 2.2% on the year, could set the stage for an upside surprise in today's CPI report, but muted wage gains from Friday's September non-farm payroll report, which included the addition of 336,000 new jobs last month, suggests more risk to the downside.
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