Surprise Party

Image source: Steve Heap and Zamurovic Brothers - Shutterstock

What's going on?

Data out on Thursday showed that US consumer prices rose by less than expected last month, so it might be time to carefully dig out the balloon arch.

What does this mean?

The Federal Reserve (the Fed) has hiked interest rates by a strapping 0.75 percentage points four times in a row now, in an increasingly desperate bid to bring runaway price rises down to a gentle stroll. Definitely monotonous, but maybe effective: used car prices were 2% lower last month than the one before, and even stomach-turning food prices finally took a breather. On top of that, a record drop in headache-inducing health insurance costs led to the steepest slide in the price of medical care services in over fifty years. And even the uptick in stomach-turning food prices finally took a breather. So sure, there was the biggest monthly jump in accommodation costs for three decades, but that wasnt enough to kill the vibe: overall US consumer prices rose a lower-than-expected 0.4% in October from the month before, and just 7.7% compared to the year before the lowest year-on-year increase since January.

Why should I care?

For markets: Pause the tunes.
Best wait a while until you post your party invites: the Fed said earlier this month that its hoping to see a pattern of weakening monthly inflation, and warned that peak rates will probably float even higher than they were initially expecting. But investors must be covering their ears: markets are already anticipating a smaller stock-friendly hike in December, which might be why the S&P 500 ticked up 4% after the news.

Zooming out: Hope for the best, expect the best.
Looks like that optimisms jumped across the pond: the eurozones inflation hit a historic high of nearly 11% last month, but one member of the European Central Bank presumably donning intensely rose-tinted glasses believes the regions price rises could start slimming down. Still, the situation theyre hanging their hat on to make that happen a peaceful resolution to the war in Ukraine is far from guaranteed.

Originally posted as part of the Finimize daily email.

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