JPMorgan expects Fed to continue providing ‘insurance rate cuts’ after CPI data

JPMorgan senior economist Joseph Seydl writes that with the latest CPI inflation data coming in softer than expected – the first decline in y/y core CPI since May – the bank continues to expect the Federal Reserve to provide “insurance” rate cuts to support weakening labor demand. The core services inflation is trending lower, and this moderation is largely driven by easing shelter inflation and other service categories which are sensitive to labor market conditions, the economist tells investors in a research note. Energy inflation saw a notable increase in September, rising 1.5% – the largest monthly jump since December – but energy prices are volatile, and gasoline prices, which contributed to this spike, have since declined, JPMorgan economist writes, noting that the energy inflation is unlikely to continue at this pace when October data is released.