(Reuters) – The U.S. Federal Reserve (Fed) is expected to cut the federal funds rate target by a quarter of a percentage point next month to gradually bring it down to 3.5% or lower by the end of 2025 , show interest rate futures.

This rate of decline is slightly higher than that previously anticipated by the financial markets, before the publication of today’s macroeconomic data.

Consumer prices (CPI) increased by 2.4% in September year-on-year against a slowdown to 2.3% expected by the consensus, while weekly unemployment claims increased last week to 258,000 against 225,000 last week. previous week, largely due to Hurricane Helene.

After the release of these two statistics, traders gave up on the idea of ​​a Fed rate pause next month. And if most of the expectations on the financial markets continue to reflect the idea that the Fed will stop reducing its key rates when they are in the range of 3.50%-3.75% in mid-2025, Bets on a final rate slightly below this threshold at the end of 2025 or the beginning of 2026 are starting to emerge.

The key rate is currently between 4.75% and 5.00%, after the 50 basis point cut decided by the Fed in September. The bank’s monetary policy makers said they made the decision out of a desire to “recalibrate” to account for slowing inflation and cooling job markets over the previous year.

On a monthly basis, the CPI increased by 0.2% in September, against 0.1% expected by economists, due to an increase in housing and food costs.

“The larger-than-expected rise in the consumer price index in September does not signal a further acceleration in inflation and will not dissuade the Federal Reserve from cutting key rates by 25 basis points at its meeting November,” writes Ryan Sweet, chief economist at Oxford Economics.

“The Fed must continue to normalize its interest rate policy to keep the economy on track for a soft landing,” he added.

(Reporting Ann Saphir; Claude Chendjou, editing by Kate Entringer)

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