Synopsis:

CIBC reports that the October CPI print aligned with expectations, reinforcing the likelihood of a 25bps Fed rate cut in December. Both headline and core inflation rose steadily, matching previous months’ gains, with inflationary pressures expected to ease as labor market slack builds, putting inflation on track for the Fed’s target by mid-2025.

Key Points:

• CPI Figures in Line with Forecasts: October’s headline CPI rose by 0.2% month-over-month and 2.6% year-over-year due to base effects, while core CPI (excluding food and energy) rose 0.3% month-over-month and remained at 3.3% year-over-year, as anticipated.

• Core Inflation Breakdown: Core goods prices were flat, offsetting the slight 0.3% month-over-month increase in core services ex-housing, a slight deceleration from September’s pace.

• Outlook for Inflation and Fed Policy: With labor market slack increasing, CIBC expects inflation to be contained, with core inflation projected to reach the Fed’s target by mid-2025, supporting the Fed’s likely 25bps rate cut in December.

Conclusion:

CIBC finds October CPI data in line with expectations, keeping the Fed on track for a 25bps rate cut in December. Easing inflationary pressures, driven by building labor market slack, suggest inflation is on course to meet the Fed’s mid-2025 target, providing a stable outlook for the Fed’s policy trajectory.