Citi: expects Fed favored inflation gauge to support 25 BP rate cut in November

Citi economist Andrew Hollenhorst believes that the combination of the U.S. PPI index and yesterday's unexpectedly higher CPI supports the Fed's decision to cut rates by 25 basis points next month. The Fed's favored inflation gauge, PCE, combines price data from both CPI and PPI, so the combination of the two figures allows forecasters to make an accurate prediction for September's PCE. Citi believes that the core PCE, which excludes volatile food and energy prices, will rise 0.21% in September from a year earlier, while the 12-month PCE will fall to 2.6% from 2.7% in August. That should keep the Fed cutting rates, Hollenhorst noted.