Citi: Expects the Fed's preferred inflation indicator to support a 25bp rate cut in November

ChainCatcher news, Citigroup economist Andrew Hollenhorst believes that the combination of the unexpectedly high CPI from yesterday and the U.S. PPI index supports the Federal Reserve's decision to cut rates by 25 basis points next month. The Fed's preferred inflation measure, the PCE, combines price data from both CPI and PPI, so this combination allows forecasters to make accurate predictions for the PCE in September.

Citigroup expects that the core PCE, excluding the volatile food and energy prices, will grow by 0.21% month-over-month in September, while the year-over-year PCE will decrease from 2.7% in August to 2.6%. Hollenhorst pointed out that this should encourage the Fed to continue lowering rates.