Could ‘higher for longer’ make a return?

Thursday at 02:52 AM

U.S. Federal Reserve Chair Jerome Powell attends a press conference following a two-day meeting of the Federal Open Market Committee on interest rate policy in Washington, U.S., November 7, 2024.

Annabelle Gordon | Reuters

This report is from today’s CNBC Daily Open, our international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

What you need to know today

U.S. inflation picks upThe headline inflation rate in the U.S. came in at 2.6% for October, in line with market expectations. Core inflation — which strips out prices of food and energy — held steady at 3.3%. The headline reading is higher than the Federal Reserve’s target, which might complicate the Fed’s easing path.

Markets little changed after inflation dataU.S. markets were mostly rangebound after the October inflation reading, with the S&P 500 and the Dow Jones Industrial Average rising just 0.02% and 0.11%, respectively. The Nasdaq Composite ended the day with a 0.26% decline. Across the Atlantic, the pan-European Stoxx 600 fell 0.13%.

Bitcoin continues setting fresh recordsBitcoin continued to set fresh records on Wednesday, briefly crossing the $93,000 mark as traders assessed October inflation data. The cryptocurrency rose to a fresh record of $93,469.08, before paring some gains, and was last up at $90,476, according to Coin Metrics. Trump, on the campaign trail, has had a pro-crypto stance, promising to make the U.S. the “crypto capital of the planet.”

AMD announces layoffsChipmaker AMD will lay off 4% of its staff, or about 1,000 workers, as it tries to strengthen its position in the artificial intelligence chip space currently dominated by Nvidia. The firm had 26,000 employees at the end of last year, according to a U.S. SEC filing. AMD is the second-biggest producer of graphics processing units, or GPUs, behind Nvidia.

[PRO] Wells Fargo urges caution on Trump trade Wall Street has been pumping money into the so called “Trump trade,” investing into companies and stocks tied to Trump’s campaign promises, but that doesn’t mean those bets will pay off, according to the Wells Fargo Investment Institute.

The bottom line

Shakespeare famously said: “All the world’s a stage, and all the men and women merely players; They have their exits and their entrances, and one man in his time plays many parts.” With October’s inflation reading coming in line with expectations, the stage seems set for a final rate cut in December, bringing the Fed Funds rate to the central bank’s target of 4.25%- 4.5% that it had set in its so called “dot plot” released in September. It is important to note that the October reading is the first-time headline inflation has risen since March, and the 2.6% figure is higher compared to the Fed’s target of 2%. As such the path now is less clear for 2025. U.S. President Joe Biden will make his exit from the Oval Office on Jan. 20, and President-elect Donald Trump will make his entrance, with all his promises of tariffs and tax cuts. The one man then, that has to play many parts will be Fed President Jerome Powell. Going back to the “dot plot,” the Fed in September had expected that rates will be cut by another 100 basis points by the end of 2025, and another 50 bps by the end of 2026. However, as economists have said, Trump’s policies — if followed through — are likely to be inflationary, and with a projected Republican trifecta — control of presidency, Senate and House — the possibility that he will be able to enact what he promised is increasingly possible. What this means then, is that the Fed may be forced to slow or halt its easing path, if inflation ticks up again in a second Trump term. In short, the term “higher for longer” may rear its head, once again.

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