Inflation Eases, Fueling Market Rally and Boosting Confidence in Fed Moves
The September CPI report delivered a welcome surprise as inflation rose just 0.3% month-over-month, bringing the annual rate to 3%. Both figures fell below economist expectations, signaling potential cooling in price pressures. Core CPI, excluding volatile food and energy costs, increased by 0.2% monthly and 3% annually.
Markets responded with vigor—the Dow Jones Industrial Average surged over 500 points to a record close, while the S&P 500 and Nasdaq also hit new highs. Investors interpreted the data as confirmation that the Federal Reserve can maintain its rate-cutting trajectory without reigniting inflation.
The Fed now faces reduced pressure to combat inflation, with the annual rate hovering just above its 2% target. This breathing room allows policymakers to shift focus toward employment concerns. Market consensus anticipates a quarter-percentage-point rate cut at the next Fed meeting, with another likely in December.
