Anna 
Analysts at Danske Bank offer insights into the latest US consumer inflation data, which was released on Thursday and has revived expectations of further policy tightening from the Federal Reserve.
The release of September’s Consumer Price Index (CPI) data in the United States has become the major global macroeconomic and market event in the past 24 hours. While the core inflation rate was in line with expectations at 0.3% monthly, the overall inflation rate unexpectedly increased by 0.1 percentage points to 0.4%, with an annual rate of 3.7%. The immediate market response was marked by a surge in bond yields and a steeper yield curve, leading to a decrease in risk appetite across various assets, along with a stronger US dollar.
Despite the market’s reaction and an increased likelihood of another Fed rate hike (to approximately 40%), it’s essential to focus on the specifics of the inflation data. This unexpected increase was primarily driven by rising housing prices, which had been on a downward trajectory for months. It is believed that this spike is unlikely to be sustained, and other indicators do not suggest otherwise. Furthermore, it’s highlighted that the underlying inflation measures referenced by the Federal Reserve were fully in line with expectations. As a result, Danske Bank maintains the perspective that US policy rates have reached their peak.
These insights provide a nuanced understanding of the US inflation data and its potential implications for Federal Reserve policy decisions and the broader financial markets.
