October CPI: The Key Inflation Number Investors Should Be Watching

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It’s that time of month again. Another Consumer Price Index (CPI) reading is on tap, this time for the month of October. Accordingly, given all the market volatility we’ve seen of late, this October CPI print could be among the more consequential reports we’ve seen of late.

That’s because investors are widely debating where rates will end up next year. The terminal rate, or where the Federal Reserve will pause rate hikes, is a hotly debated metric. Up until recently, most experts had suggested that rates would peak out somewhere below 5% next year. However, a number of experts are now calling for a potential terminal rate of more than 5%, depending on how CPI data comes in.

October’s inflation report will come out tomorrow, and thus far, most risk assets have been treading water. There are the midterm elections, which could boost stocks in the near term as investors price in the benefits of a divided House and Senate. And there’s also the potential for geopolitical concerns to either calm down or heat up. Thus, it’s an uncertain time, with many factors to be taken into consideration.

With that said, let’s dive into the one number investors should be watching in tomorrow’s report.

What Will the October CPI Reading Be?

An interesting Wall Street Journal forecast of economist projections suggests that October’s CPI reading will likely come in 0.6% higher than September. This would represent an acceleration from September’s 0.4% increase, though the annual headline reading is likely to dip below 8% for the first time since February.

It’s important to keep in mind that prices are still going up significantly on a month-over-month basis. The expected 0.6% monthly increase in inflation isn’t something to brush off. Prices will still likely come in hot, suggesting more tightening is needed.

That said, the base effects of the more rapid rises we started to see at the end of last year are now being factored in. It’s likely we’ll see annualized inflation numbers come down, even if monthly inflation remains elevated. Thus, perhaps there’s some wiggle-room with respect to how soon the Fed can take its foot off the brake.

We’ll have to see — these are only projections. However, it’s clear that tomorrow’s report will be a very important one. I, for one, will be diving into the details of this report as the data becomes available.

On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.

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