Despite the Fed’s several aggressive rate hikes this year, the Consumer Price Index (CPI) accelerated 8.2% year-over-year in September, exceeding expectations. Since the Fed is committed to reducing the inflationary pressures, the hotter-than-expected employment data and CPI report for September would keep the Fed on track to approve another massive rate hike in its upcoming meeting.
According to the economists at ABN Amro, “The inflation surprise seals a 75-bps hike taking place at the November FOMC meeting, and it raises the risk that the Fed may go even further than our current base case of the fed funds rate topping out at 4.5% in the upper bound.” Amid such policy tightening, recession odds are increasing.
