Jerome Powell, the Federal Reserve Chair, is betting on a drop in U.S. inflation as the third quarter comes to a close, offering a path to potential rate cuts.

Inflation and Fed Rates

Data points to the consumer price index (CPI) rising by just 0.1% in September, the smallest jump in three months. Compared to last year, the CPI is up by 2.3%, the slowest pace since early 2021. Stripping out volatile food and energy prices, the core CPI shows an increase of 0.2% from August and 3.2% from last year. These numbers suggest a quarter-point rate cut during the Fed's early November meeting, though a strong labor report adds complexity to Powell's decisions.

Key U.S. Indicators

Alongside the inflation news, September’s job report was stronger than expected, complicating Powell’s decision-making as strong labor growth might reignite inflation. The producer price index (PPI), also anticipated to show slower growth, could alleviate inflationary pressures. Upcoming Fed minutes and the University of Michigan's consumer sentiment index will provide further insights.

Global Central Bank Trends

Other major central banks are also moving ahead with rate cuts. In Asia, the Reserve Banks of New Zealand and Korea are expected to trim rates this week. New Zealand's bank is cutting by half a percentage point due to labor market weaknesses, while Korea's bank is likely to drop rates by a quarter point as inflation slows. Meanwhile, the European Central Bank's upcoming minutes may signal a rate cut, with the UK also considering aggressive rate cuts following statements from the Bank of England Governor.

With U.S. inflation cooling, the Federal Reserve may have room to maneuver in planning rate cuts. Global central bank trends support such policies despite economic challenges caused by various factors.