Market participants are preparing for Thursday’s CPI inflation data for October

On Thursday, November 11 at 8:30 a.m. EDT, the BLS (Bureau of Labor Statistics) will release its latest CPI inflation report for October 2022.

Many analysts and market participants expect (hope) that the Federal Reserve will start to turn from dramatic and strong rate hikes at each FOMC meeting to a pause in hikes in the first half of next year. The sad truth is that the most accurate and current forecast shows inflation remaining firm with CPI above 8% and PCE above 6%.

PCE is still three times higher than the Fed’s inflation target of 2%. Americans and global citizens know for sure that inflation remains deep, persistent and high because their data comes from the prices they pay for goods and services.

The most current and accurate data on inflation comes from the Federal Reserve Bank of Cleveland Now inflation. The Federal Reserve Bank of Cleveland publishes estimates or forecasts for both PCE and CPI each day. The numbers and charts listed are the latest projections the Fed made today.

According to their website, “The model relies on relatively few variables and is tested using real-time data. The model’s nowcasting accuracy improves as the data accumulates over a month or quarter, and it easily outperforms various statistics.”

The image above is the latest figures for November and October 2022. Inflation Nowcasting currently shows that the CPI (Consumer Price Index) rose 0.76% from October and 0.71% for the first week of November. It also shows that inflation has been persistently and extremely hot at over 8% in October and November at 8.09% year-on-year.

Gold futures are trading partially higher. As of 4:120 p.m. EST gold futures, the most active December contract was settled at $1,678.20 after factoring in today’s net gain of $1.60. Today’s fractional gain would have been a deep decline if the dollar’s weakness hadn’t moved gold to the upside today. Gold gained 0.10%, and the dollar index is currently flat at 110.04, down 0.66%.

The screenshot above was taken at 4:41 PM EST, with spot gold currently holding steady at $1,674.50, a net drop of -$8.20 today. On closer inspection, the Kitco Gold Index (KGX) shows that normal trading reduced gold by $16.95 and a weak dollar added +$8.75, resulting in today’s decline.

It is too early to predict what the Federal Reserve will do at its Dec. 14 FOMC meeting. However, Fed fund futures traders are almost evenly split between whether the Fed will raise rates by 50 or 75 basis points, according to CME’s FedWatch tool. There is a 52% chance that the Federal Reserve will raise rates by 50 basis points, and a 48% chance that the Fed will raise rates by 75 basis points. This would take the benchmark rate to or between 425-450 basis points

450 – 475 basis points if the Fed raises rates by 75 basis points.

Regardless of what actions the Federal Reserve takes at the next FOMC meeting, one thing is pretty clear; CPI inflation remains above 8% after five consecutive rate hikes at each FOMC meeting since March. As long as inflation remains at a 40-year high, it’s hard to see whether the Federal Reserve will begin to stop or ease interest rate hikes.

For those who want to get more information, it is enough to use this link.

As always I wish you good trading and good health,

Disclaimer: The views expressed in this article are those of the author and may not reflect his views Kitco Metals Inc. The author has made every effort to ensure the accuracy of the information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is for informational purposes only. It is not a requirement to make any exchange for commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article accepts no responsibility for any loss and/or damage resulting from the use of this publication.

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