14

November 2024

Market News Macro Economic Insights

The annual inflation rate in the US rose to 2.60% in October 2024

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Adriaan Pask

Chief Investment Officer, PSG Wealth

Event

 The annual inflation rate in the US rose to 2.60% in October 2024, increasing from 2.40% in September—the lowest rate recorded since February 2021—aligning with market expectations.
• According to Trading Economics, this marks the first rise in inflation in seven months, driven by a smaller decline in energy costs (-4.90% compared to -6.80%), primarily due to less significant drops in gasoline (-12.20% vs. -15.30%) and fuel oil (-20.80% vs. -22.40%). Meanwhile, natural gas prices increased by 2%, matching September's rate, and inflation for shelter remained steady at 4.90%. 

The Impact
  •  Wall Street’s three major indices traded flat following the release of the latest CPI report which bolstered forecasts for a potential Federal Reserve (Fed) rate cut next month, with CME FedWatch showing an 80% chance. The S&P 500 booked marginal gains, and the Dow gained 47 points or 0.10%, while the Nasdaq ticked lower by 0.20%.
  • The US dollar index remained above 106.5, holding at its highest level in a year as investors reacted to the latest inflation data and Federal Reserve commentary. Furthermore, Trading Economics added that “the dollar’s strength has been further bolstered by Trump trades, as markets bet that robust growth and higher inflation under a second Trump administration would limit the Fed's ability to cut borrowing costs.”
  •  The 5-year US Treasury yield fell to 4.30%, while the yields for the 10-year and 30-year notes came in at 4.43% and 4.59%, respectively.
  • The FTSE/JSE All Share Index closed about 0.50% lower at 83 803, its lowest since 19 September 2024, retreating for the fourth consecutive day. Traders assessed the latest US inflation report, while concerns about China’s economy and President Donald Trump's planned policies persisted.
The Assessment
  • The Federal Reserve finds itself in a difficult position: if they cut rates prematurely, they risk letting the inflation
    genie out of the bottle, but if they keep rates too high for too long, it could result in more severe economic pain downstream.
  • The question for us now is: “What will constitute a policy error?” Is it slowing interest rates in three, six or 12 months? We will continue to monitor the Fed's actions and take appropriate steps when needed.