We take the same and start again. Like last month, the release of inflation figures for September in the United States came out above consensus expectations and our reading of them remains largely unchanged. The dynamics of prices in the main components remain on the rise, except for energy where prices fell by -2.1% over the month (after -5% in August) but nevertheless remained up by nearly 20% over 1 year. On food, the other volatile component, prices increased once again in September with some variations that seem grotesque (+45% over the month and +91% over one year for the price of canteens!). Moreover, as we mentioned in our analysis (meeting on Monday, September 19) when publishing the inflation figures for the month of August, the increase in rents continues and has even reached a peak since 1990 By construction, this indicator, which accounts for almost a third of the core index, has strong inertia and moves with a lag of several months in relation to real estate prices. In the end, headline inflation increased by 0.4% over the month, which limits the year-on-year decline to -0.1% to reach 8.2%. Although the peak is well behind us, inflation remains, despite everything, on a fairly high plateau and owes its decline in recent months only to the drop in oil prices. In core inflation, on the other hand, the rise was once again marked (+0.6% over the month) and continued to rise at an annual rate (+6.6%).
These poor figures leave little room for doubt as to the next rate hike by the Fed in early November, which should still stand at +75 bps. The terminal rate anticipated by the market is now close to 5% by the first half of 2023, well above the "neutral rate" put forward by the members of the FOMC.
As for the financial markets, if the start of the week in negative territory did not particularly suggest a publication below expectations, it is, on the other hand, interesting to dwell on the movements observed during the day on Thursday ( day of publication of the inflation figures). Indeed, if the markets initially reacted quite logically (fall in equities, rise in rates and in the dollar) to higher-than-expected US inflation, which maintains the idea that the Fed will have to remain very restrictive, sentiment then completely reversed, leaving many investors flabbergasted. The S&P 500 thus fell during the day from a low of -2.39% to a close of +2.60%, making it the fifth largest reversal in the history of the index. The explanation is to be sought far from macroeconomic fundamentals. Indeed, following the disappointing inflation figures and the initial decline observed, many hedge funds wanted to cash in their gains on their short positions. The simultaneous redemption of these positions, coupled with the triggering of stops, got the better of the downward movement. This event reminds us that the current tension on the market as well as the weight of hedge funds and systematic positions can lead to violent movements while global liquidity is low.
