Expectations increase for FED rate hike after US inflation data

The performance of the US treasury bonds rose on Thursday, after news that consumer prices in the world’s largest economy exceeded forecasts, suggesting that the Federal Reserve could raise the interest rates once again this year.

Consumer prices in USA They rose in September due to rising rent and gasoline costs, although core inflation slowed, the data showed.

The CPI rose 0.4% last month, compared to expectations for a 0.3% rise, after advancing 0.6% in August, its biggest rise in 14 months.

If the volatile food and energy components are excluded, the CPI It advanced 0.3%, in line with forecasts. The core CPI increased 4.1% year-on-year in September, after rising 4.3% in August.

Inflation data

Following the inflation data, rate futures continued to assume that the Fed will keep them unchanged next month, but the odds of an increase rose to nearly 41%, from 28% on Wednesday, according to CME’s FedWatch tool.

“The report alone likely won’t be enough to suggest to the Federal Open Market Committee that it will need to tighten policy again in November, but it will see it as a justification for its message that policy needs to remain ‘tighter.’ for longer’, with the prospect of another rise in rates still on the table”, said Stuart Cole of Equiti Capital.

The 10-year bond yield gained 1.5 basis points to 4.611% after hitting two-week lows.

The return on two-year papers, which reflects rate expectations, advanced 5.5 basis points, to 5.062%.