US inflation data for September suggest the United States Federal Reserve won’t be cutting rates any time soon, according to ANZ’s Head of G3 Economics Brian Martin.
Official data showed the headline consumer price index rose 0.4 per cent in September, down from growth of 0.6 per cent a month earlier. Annual inflation growth was unchanged at 3.7 per cent.
Supercore inflation (which focusses on services excluding shelter) grew 0.6 per cent.
Speaking on the 5 in 5 with ANZ podcast, Martin said the supercore numbers suggest it’s “going to take a while really for inflation to come back down”.
The Fed’s thinking is therefore likely to be, “we mightn’t want to raise interest rates, but we’re certainly not going to be cutting any time soon”, he said. “[That] fits with the higher-for-longer [rates] story.”
With bond yields remaining high, Martin said, the Fed may feel part of the economic-management job is already being done for them.
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The US data comes after officials from the European Central Bank (ECB) kept rates steady because inflation in Europe is not as strong or rapid as it is in the United States.
“Europe hasn’t had the buoyancy in its economy that the United States has,” Martin said.
“Growth has come down and that has meant the intensity of inflation pressures, that excess demand in the economy that we see still in aspects of the US, just isn’t there in Europe.
“I think the European inflation picture can therefore come down sustainably quicker than it can do in the United States.”
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