NEW YORK, (Reuters) – U.S. consumer price increases were solid in September. They are expected to continue rising in the coming months amid a rise in energy product prices. This would put doubt on Federal Reserve’s belief that inflation is temporary.

COMMENTS

RANDY FREDERICK – MANAGING DIRECTOR of TRADING and DERIVATIVES, SCHWAB CENTER for FINANCIAL RESEARCH AUSTIN, TEXAS

It’s quite a modest movement. CPI fell last month so it doesn’t surprise us. It’s PPI that has been more difficult. While that’ll be something to watch, this isn’t too different from what we expected.

“Most people know that inventory shortages and supply chain disruptions continue; very few forecasters are predicting that they will disappear anytime soon. I think that the tapering is on track. The data doesn’t suggest that this will change. It is important that you pay close attention to the bank earnings reports this week as well as the PPI number.

SAM STOVALL, CHIEF INVESTMENT STRATEGIST, CFRA RESEARCH, NEW YORK

The headline was a bit hotter than we expected, but it was still in the right range. I believe the worst is yet to come. We expect the fourth quarter CPI year on year will average 5.5% and then moderate in 2022. It is possible that the worst will yet come. Inflation will continue to rise, which will allow the Fed to keep its target of announcing a tapering programme at the November meeting. It then plans to immediately begin and last until the middle 2022.

NANCY DAVIS, FOUNDER, QUADRATIC CAPITAL MANAGEMENT, GREENWICH, CONNECTICUT (emailed)

The still high Consumer Price Index on Wednesday marks six months of inflation data. This suggests that inflation may not be as temporary as investors had hoped. The start of the third quarter earnings season coincides with it, so investors will want to know if inflation has started to adversely affect corporate profits.

Federal Reserve will not change its position on tapering because of the Inflation data. Already, the Fed will announce its tapering plans. The central bank is likely to want to keep their option with regards to their hiking cycles. The Federal Reserve could be forced to end accommodation sooner than expected if inflation is at an all-time high. This could have a negative impact on stocks and other risk assets.

JIM AWAD, SENIOR MANAGING DIRECTOR, CLEARSTEAD ADVISORS LLC, NEW YORK

The headline line was slightly higher than anticipated, and the core was slightly lower than expected. However, I believe we are beginning to form consensus that inflation will be here a bit longer than originally believed by the Fed. They are now beginning to accept this view.

RICK MECKLER, PARTNER, CHERRY LANE INVESTMENTS, NEW VERNON, NEW JERSEY

There will be renewed interest for some of the cyclical stock. This is not a good sign for tech stocks or stocks with multiples that are high.

Although the Fed might make noise about concerns over the inflation numbers they still consider inflation transitory. They will keep on the same track where buybacks are ended and take a more focused approach to higher rates in 2022.

MINH TRANG SENIOR FX TRADER MINH TRANG, SENIOR VALLEY BANK SANTA CLARA CALIFORNIA

“The overreaching theme has been inflation for the past two or three weeks now and I think the data really came in in-line with expectations – obviously the numbers were a little bit above expectations, but I don’t think that really surprises a lot of folks. To find out that prices are rising, you don’t need to travel far. You can simply go to the grocery store or fill up your gas tank to discover this.

It gives the Fed more support to change their monetary policy in regard to tapering and potentially higher rates.

“I think that’s why the dollar will remain firm … overall the dollar has been rallying relatively strong for the last, I would say month or two.”

PETER CARDILLO, CHIEF MARKET ECONOMIST, SPARTAN CAPITAL SECURITIES IN NEW YORK

“Core rate was consistent with our expectations. It indicates that there is persistent inflation. “Inflation will be longer-lasting than what the Fed anticipates.”

“In my view, this speeds the tapering movement and we will probably receive an announcement next month.”

GENNADIY GOLDBERG, INTEREST RATE STRATEGIST, TD SECURITIES, NEW YORK

“Inflation was stronger than anticipated, probably due to Covid-impacted parts. Although the auto market declined less than anticipated, it was still accompanied by a rise in rents, which is worrying. This could be interpreted as a return of normal. People are moving back to cities, which is a return from the post-Covid norm.

But, certainly, quite some price pressure is here that was previously showing up. So this is a stronger print than anticipated even though they are actually weaker if you take a look at core values overall.

This will reinforce for markets the idea that, although the Fed might increase earlier than expected, they may not raise as much as anticipated. They really want to suppress inflation.

ART HOGAN CHIEF MARKET STRATEGIST NATIONALSECURITIES NEW YORK

“It is modestly warmer, in terms of the headline numbers, and pretty close in the core. This is not necessarily disruptive. It doesn’t affect our position in terms of inflation or monetary policy.

The good news? For three consecutive months, the increase in sequentials has slowed down. This is what it means. We are seeing an increase in the number of people who visit our site, however, they are decreasing by one-tenth of their normal size. This is showing improvements. That’s why I believe that investors should be focusing on it.”

This doesn’t change the consensus that we will likely hear more about tapering at the Fed’s next meeting in November. Therefore, I believe the Fed remains in accord with their consensus regarding next steps.

We have a market with more headwinds and less tailwinds when we start earnings season. … “The path of least resistance is still a little slow here.”

We’re going have a market where earnings season shifts the focus away from the macro and towards the micro.”

JIM VOGEL INTEREST RATES STRATEGIST FHNFINANCIAL MEMPHIS, TENSEE

The market is able to maintain the flattening trend and take interim Treasury yields up to new highs. With just about any type of news, people will continue to see reasons to worry more about inflation.

The next major thing to watch for in the 10-year will be how the auction proceeds to the 30-year. If the 30 year auction keeps the flattening trade going and get an award of around 2.06%, then that should keep the tens below 1.60. But what you immediately notice is that the 5-year rate is higher than 1.10%. This is a sign that the Fed may increase rates next May. It is very difficult to piece together. Even if inflation is a concern, the Fed will likely continue to debate about it for at least four months.

OLIVER PURSCHE, SENIOR VICE PRESIDENT, WEALTHSPIRE ADVISORS, NEW YORK

It’s not surprising. We know that inflation is elevated due to commodities prices being up and the supply chain disruptions that we’re witnessing.”

“It is reassuring to the Fed because there weren’t any surprises.”

I don’t think there will be stagflation. Although the pace of growth is slower than the past 12 months, the economy will continue to grow. However, the overall economy looks good and consumers seem to have a desire to eat. That’s good news for the economy.”

“We must bifurcate to see where inflation is. There is no one size fits all solution.

It’s important that wages rise by 5% in the past 12 months. This will have economic and social benefits. However, we are worried about if wages continue to rise at an alarming rate. This is highly unlikely.

(Compliled by the Global Finance & Markets Breaking News team)