Investing.com — Even a small upside surprise in Tuesday’s consumer price index report could lock in a December interest rate hike from the Federal Reserve, according to BeiChen Lin, senior investment strategist at Russell Investments.
“In the wake of a blowout jobs report and other signs of a resilient economy, the Fed is going to have little patience with inflation. Even a minor surprise could seal the deal on a December hike,” Lin commented.
Traders are already pricing in an 84.5% chance of a 25 basis point hike at the Fed’s Dec. 9 meeting, up from 76.3% a day earlier, according to CME FedWatch.
Lin noted that elevated mortgage rates are weighing on the housing market, which should help contain some inflation pressures.
Beyond the headline figures, he said investors will also watch how widespread price increases are across the economy, as that will play a key role in shaping future Fed decisions.
Lin added that Thursday’s stock sell-off has washed away some of the market’s earlier optimism.
“With equity sentiment leaning cautious instead of overbought, markets could react positively if inflation comes in softer than expected,” he said.
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