Stocks are storming out of the gate on the U.S. inflation surprise

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U.S. stocks soar after inflation data was lower than forecast, raising hopes Federal Reserve will slow the pace of rate increases. Read on

“For the second consecutive month, inflation came in below expectations. This is good news for markets and the Federal Reserve,” said Phillip Neuhart, director of market and economic research for First Citizens Bank Wealth Management. “Should this downtrend persist, it allows the Fed to slow the pace of interest rate hikes and eventually pause in the first half of next year.”Article content

Investors didn’t think inflation was going to come down as fast as economists were forecasting, but now it’s coming down even faster, Morgan Stanley strategist Matthew Hornbach tells Bloomberg TV.Still, some investors are approaching the CPI surprise cautiously. “While the war against inflation is turning, we are a long way off declaring victory and the Fed will keep its hawkish stance for a while longer, even if it does potentially force a recession,” said Richard Carter, head of fixed interest research at Quilter Cheviot.

Following the Fed, the European Central Bank will announce its rate decision Thursday. Markets will also contend with decisions from the Bank of England and monetary authorities in Mexico, Norway, the Philippines, Switzerland and Taiwan.

 

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