What Oct. CPI means for the Fed and Trump: 2 economists' takes
The October Consumer Price Index (CPI) report showed prices rose slightly during the month, in line with consensus estimates. The shelter inflation component continues to be particularly sticky, climbing higher. New Century Advisors chief economist Claudia Sahm and Citi chief global economist Nathan Sheets join Morning Brief hosts Seana Smith and Brad Smith to break down what the economic data says about the US economy and what it means for the Federal Reserve amid the ongoing interest rate easing cycle. “The print came in as expected, but we were expecting something pretty firm. So, there is progress on inflation, we are pointed in the right direction, but it has been a slow grind. And this is another month that fits in that slow grind,” Sahm tells Yahoo Finance. Sahm is the namesake for the Sahm Rule, one of the Fed's key recession indicators. Sheets adds that this marks "another toothy CPI reading, and I think it highlights that underneath this is a still strong economy… I think I've got a markup the probability of a no-landing scenario where the economy is firmer, and inflation is somewhat stickier. And in certain respects, that's good news. I'm happy to have a strong economy, but that path back to 2% [the Fed’s target inflation rate] is looking more challenging than I thought it would be.” Sahm says the October data doesn’t change her expectations for the Fed’s December meeting. “I think this keeps the Fed on track to be doing another 25 basis points in December. And frankly, I don't think the Fed is or should be as concerned about the strong growth as long as you have the supply to go with the demand… And it is not inflationary, right? You do have to pay attention to it, but I think the Fed looks at this fundamentally and is in a good place.” At the annual Yahoo Finance Invest conference, Federal Reserve Bank of Minneapolis president Neel Kashkari indicated that upside inflation movements would most likely warrant a rate pause at the central bank's December meeting. The CPI data comes in just after former President Donald Trump’s 2024 reelection. While investor sentiment has been broadly positive about the president-elect’s second term in the White House, there have been some concerns that Trump’s campaign promises could be inflationary. Sheets says, “As a general matter, we've got to wait and see what the administration's policies look like. If we had full-bore tariffs and if we had full-bore deportations, would that be a significant inflationary shock to the economy? Absolutely, it would be. But elections are broadly run on rhetoric, and how that rhetoric is then funneled down into actual policies is a very exhausting and difficult process.” To watch more expert insights and analysis on the latest market action, check out more Morning Brief here. This post was written by Naomi Buchanan.
