The CPI report comprehensively exceeded expectations but still showed a downward trend, with traders becoming more convinced that the Federal Reserve will cut interest rates by 25 basis points next month.

According to data released on Thursday, the overall inflation rate in the United States slowed down in September but remained higher than expected, indicating a pause in the recent process of easing price pressures. This could provide a reason for the Federal Reserve to slow down the pace of rate cuts.

The U.S. unadjusted CPI annual rate for September fell to 2.4% from 2.5% in the previous month, marking the sixth consecutive month of decline and reaching a new low since February 2021, but higher than the market's expected 2.3%. The U.S. unadjusted core CPI annual rate for September recorded 3.3%, the highest since June and above the market's expected 3.2%. The month-on-month growth rates for the overall CPI and core CPI in September were 0.2% and 0.3%, respectively, both in line with the previous values and exceeding expectations.

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At the same time, the number of initial jobless claims in the United States for the week ending October 5th recorded 258,000, higher than the expected 230,000 and the previous value of 225,000, reaching the highest level since the week ending August 5th, 2023. This may be affected by factors such as hurricanes.

After the release of the U.S. CPI data, the market fluctuated sharply, with spot gold fluctuating by $17 in a short period, hitting a daily high. The U.S. dollar index once touched the 103 level and is currently in line with the level before the non-farm report, with a 15-minute fluctuation of nearly 50 points.

U.S. short-term interest rate futures rose after the inflation data was released. Traders began to withdraw bets on the Federal Reserve pausing rate cuts in November and increased bets on a 25 basis point rate cut.

Analyst Enda Curran pointed out that it was expected that housing would put upward pressure on inflation, but the food sector also seemed to play a role. The housing index rose by 0.2% in September, and the food index rose by 0.4%. These two indices together contributed more than 75% of the growth in all items.

At first glance, the CPI numbers are indeed high, as both the overall and core CPI's month-on-month and year-on-year increases exceeded expectations. The rise in core prices is not just a matter of rounding, as it increased by 0.312% in the month. The super core service industry prices rose by 0.4% in the month, the fastest increase since April.

However, analyst Cameron Crise pointed out that hidden in the background is a sharp increase in initial jobless claims, with the data increasing by 258,000 for the week ending October 5th. This seems to be caused by Hurricane "Helen". The market's reaction to the unemployment relief data is understandable, but considering the temporary driving factors, this reaction may be somewhat premature.

Vital Knowledge analyst Adam Crisafulli said that since the FOMC's rhetoric has recently turned positively towards employment, Powell and his colleagues may spend more energy assessing the initial jobless data rather than CPI. In addition, the slowdown in housing inflation is a potential positive development.Institutional analysis suggests that although the U.S. CPI increase in September was slightly higher than expected, the annual inflation rate increase was the smallest in over three and a half years, which could still lead the Federal Reserve to continue cutting interest rates next month.

Analyst Chris Anstey stated that the slightly higher-than-expected CPI report added reasons for a 25 basis point rate cut next month instead of 50.

Pepperstone analyst Michael Brown also said that despite the U.S. inflation data being higher than expected, the September CPI data seems unlikely to substantially change the FOMC's policy outlook. He pointed out:

"Despite the stronger-than-expected September employment report and given the ongoing disinflationary progress, it is expected that there will be a 25 basis point rate cut at each of the remaining two FOMC meetings this year. This rate-cutting pace could continue until 2025, until the federal funds rate roughly returns to a neutral level of around 3% by next summer. Essentially, this is the 'Fed put option,' which continues to exist in a strong and flexible form, and continues to provide participants with confidence to move further away from the risk curve. It also keeps stock market declines relatively shallow and is seen as a buying opportunity."

Analyst Joseph believes that the focus for the future is consumer spending data, so next week's retail sales report is crucial for the outlook of Treasury yields for the rest of this month.