Citigroup: The Fed's preferred inflation indicator is expected to support a 25BP rate cut in November

According to a report by Citigroup economist Andrew Hollenhorst believes that the unexpected rise in CPI yesterday combined with the US PPI index supports the Federal Reserve's decision to cut interest rates by 25 basis points next month. The Fed's preferred inflation indicator, the PCE, combines price data from both CPI and PPI, so the combination of these two data points allows forecasters to make accurate predictions for September's PCE. Citigroup believes that the core PCE, which excludes volatile food and energy prices, will increase by 0.21% month-on-month in September, while the 12-month PCE will drop from 2.7% in August to 2.6%. Hollenhorst points out that this should lead the Fed to continue cutting interest rates.