US Inflation Data: Wall Street's Test Comes Today

Eyes on Inflation Data on Wall Street

The inflation data for September in the US represents a critical turning point for investors. The Consumer Price Index (CPI) results, which will be announced today at 15:30 (GMT+3), have the potential to create significant volatility in the stock market. Economists expect the headline CPI to increase by 0.4 percent month-on-month and 2.9 percent year-on-year.

Core CPI Figures are Critical for Investors

JPMorgan Economist Michael Feroli predicts that the core CPI, excluding food and energy prices, will rise by 0.3 percent compared to August. This increase corresponds to a year-on-year increase of 3.1 percent.

Possible Effects on Stock Prices

As investors closely monitor the impact of the announced data, they will be looking for clues regarding the US Federal Reserve's (Fed) future interest rate policies. JPMorgan shared its expectations by analyzing potential market scenarios:

• 35 percent probability: If core CPI increases between 0.3 and 0.35 percent, the S&P 500 may trade sideways or increase by 0.5 percent.
• 30 percent probability: If core CPI rises between 0.35 and 0.4 percent, the S&P 500 may decline between 0.5 and 1.25 percent.
• 25 percent probability: If core CPI increases between 0.25 and 0.3 percent, the S&P 500 may rise between 0.75 and 1.25 percent.
• 5 percent probability: If core CPI increases by more than 0.4 percent, the S&P 500 may experience a decline between 1.5 and 2.25 percent.
• 5 percent probability: If core CPI increases by less than 0.25 percent, the S&P 500 may rise between 1 and 1.5 percent.

Expectations for Fed's Interest Rate Policy

The general consensus in the markets is that the Fed is expected to implement a 25 basis point interest rate cut next week. JPMorgan stated that this expectation is viewed as having a nearly 100 percent probability within economic circles. However, a potential increase in core inflation could raise the possibility of further tightening. The report stated, "If we encounter hawkish data on core goods prices, we must consider that inflation may not have reached a new peak."