WASHINGTON: US consumer prices were unchanged in September and underlying inflation retreated, supporting expectations the Federal Reserve will cut interest rates in October for the third time this year amid risks to the economy from trade tensions.
"The downside risks from slower global growth, trade disruptions and the contraction in US manufacturing could carry more weight among Fed officials," said Ben Ayers, senior economist at Nationwide in Columbus, Ohio."The odds of a rate cut in October are moving up with domestic economic data turning softer in recent months.
The report came on the heels of data on Tuesday showing the biggest drop in producer prices in eight months in September. US stocks rose after President Donald Trump confirmed he would meet Chinese Vice Premier Liu He on Friday for further trade talks, raising hopes for a deal. The dollar weakened against a basket of currencies. US Treasury prices fell.The Fed tracks the core personal consumption expenditures price index for its 2.0 per cent inflation target. The core PCE price index rose 1.8 per cent on a year-on-year basis in August and has fallen short of its target this year.
Economists expect inflation will pick up and breach the Fed's target in 2020 following the recent broadening of US tariffs on Chinese goods to include a range of consumer goods. A tightening labour market is also expected to support inflation.