Risk of prolonging elevated inflation still persists – Danske Bank

The US October inflation figures came out below expectations. Nonetheless, economists at Danske Bank believe that price pressures are still set to persist.

Inflation risks are not over yet

“While markets have reacted very positively to the October CPI print, we continue to see further risks of more persistent inflation and think it is too early to trade a clear Fed pivot.”  

“Still elevated underlying price growth, tight labour markets, inflationary market reaction and China reopening risks all favour remaining cautious on inflation.” 

“The figures challenge our hawkish call for a 75 bps hike in December, but Fed’s focus remains on terminal rate level and maintaining financial conditions restrictive. Slower hiking pace could extend the cycle further into 2023.”