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Lawrence Fuller, founder of Fuller Asset Management and the leader of a Seeking Alpha investor group, argued Wednesday that an easing of core inflation in the latest CPI report further signaled that the Federal Reserve has finished its campaign to raise interest rates.
“The Fed’s rate-hike cycle most assuredly ended in July,” Fuller told Seeking Alpha, noting that energy prices bolstered the headline CPI figure but that core figures, which exclude food and energy, represent a sign that price increases are continuing to moderate.
“The core rate fell from 4.7% to 4.3%, strengthening the disinflationary trend that began last summer,” he said. “The fact that shelter costs continue to be the largest contributor to the increase in the core rate is encouraging, because we know that new rental rates, where price increases are negligible, will bring that number down meaningfully in the year ahead.”
In government data released Wednesday morning, the consumer price index was reported to rise 0.6% in August, with the annual rate coming in slightly hotter than expected.
The annualized 3.7% rise in consumer prices was fueled by a rise in energy prices, with Fuller highlighting the fact that gasoline accounted for over half of the increase. The August CPI report showed that energy prices rose 5.6% and energy commodities climbed 10.5%. Gasoline prices advanced 10.6%, and fuel oil prices increased 9.1%.
The Fed is scheduled to announce its next policy decision on September 20. Wall Street widely expects the central bank to hold interest rates steady, with traders pricing in a 97% chance that no change will occur.
As Fuller suggested, the CPI report helped cement the expectation that the Fed would halt its rate-hiking campaign. Markets had priced in a 92% chance of no change a day before the inflation statistics were released.
