Citi on Fed Missed Opportunity to Hike
In our view, the Fed missed an opportunity to hike interest rates at its prior meeting given inflation pressures continue to build within the Producer Price Index (PPI) pipeline and inflation breadth remains elevated and inconsistent with price stability near the 2% target. Tuesday's CPI data confirmed our view as the share of CPI components rising 5% or faster jumped to 56% in October from 44% in September (Figure 3). As a result, October's share is the highest since August 2022. In our view, pipeline pressures signal inflationary pressures have not yet peaked, and inflation remains too broad-based to square with price stability or a return to the 2% target. The Fed may need to raise rates more than markets currently expect.
In our view, the Fed missed an opportunity to hike interest rates at its prior meeting given inflation pressures continue to build within the Producer Price Index (PPI) pipeline and inflation breadth remains elevated and inconsistent with price stability near the 2% target. Tuesday's CPI data confirmed our view as the share of CPI components rising 5% or faster jumped to 56% in October from 44% in September (Figure 3). As a result, October's share is the highest since August 2022. In our view, pipeline pressures signal inflationary pressures have not yet peaked, and inflation remains too broad-based to square with price stability or a return to the 2% target.
The Fed may need to raise rates more than markets currently expect.