HASSETT: OCT CPI, PCE DATA SHOULD MAKE CLEAR WHAT FED SHOULD DO

Kevin Hassett, a senior economic adviser, stated that the October consumer price index and personal consumption expenditures data should provide clarity on the appropriate path for Federal Reserve policy. The remark frames the upcoming inflation prints as the decisive input for the next rate decision, shifting market attention toward whether underlying price pressures are easing enough to justify further easing. The transmission runs through the rate-expectations channel: a softer CPI or PCE reading would likely lower implied policy rates, compressing Treasury yields and supporting rate-sensitive assets such as long-duration bonds, growth equities, and small-cap stocks, while a hotter print would push yields higher and strengthen the dollar. Fed funds futures and the two-year Treasury yield are the most directly exposed instruments, since they price policy path most sensitively to inflation surprises. The next concrete catalyst is the release of the October CPI report, whose core component relative to consensus forecasts will be the first clear test of whether Hassett's view of the data is borne out.

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