Citi: Expects Fed's preferred inflation gauge to support 25 BP rate cut in November

Golden Finance reported that Citigroup economist Andrew Hollenhurst believes that the unexpected rise in the US PPI index yesterday, combined with the CPI, supports the Fed’s decision to cut interest rates by 25 basis points next month. The Fed’s preferred inflation index, PCE, combines price data from CPI and PPI, so the combination of these two data sets enables forecasters to make accurate predictions for September’s PCE. Citigroup believes that the core PCE, which excludes food and energy prices with large fluctuations, will rise by 0.21% in September, while the 12-month PCE will drop from 2.7% in August to 2.6%. Holenhorst pointed out that this should prompt the Federal Reserve to continue cutting interest rates.