The following is an excerpt from today’s report from LFI partner publication CreditSights titled “US Chart of the Day: CPI Heatmap October 2023,” with a graphical representation on sectors and historical data. The report is available in full to subscribers online:
“October CPI surprised to the downside in a very welcome development for Fed policymakers who have emphasized their ability to ‘proceed carefully’… Today’s report is consistent with our call for inflation to continue moving lower in the months ahead, allowing the Fed to abstain from hiking rates again in 2023,” according to Winnie Cisar, global head of strategy at CreditSights in today’s report to clients. Additional details from the report include:
- Headline CPI was flat MoM versus expectations for a 0.1% increase. That brought the YoY reading down to 3.2%, from 3.7% in September. Gasoline prices were the major driver of the drop in headline CPI, falling 5.0% MoM.
- Core CPI also surprised to the downside with a 0.2% MoM increase, versus the consensus call for a 0.3% rise. That brought the YoY figure down to 4.0%, from 4.1% in September. Shelter costs downshifted materially, helping push lower the pace of core service price increases for the first time in four months.
- Today’s report is consistent with our call that the Fed can remain on hold through the end of the year and eventually shift to rate cuts in March 2024. We remain comfortable with our recent shift back to a full a Market Weight recommendation for US IG and HY and feel more confident about our constructive outlook on IG and HY spreads in 2024 following today’s report.