The Consumer Price Index (CPI) rose more than expected for the month of September, economists reporting a 0.2% increase in prices month-over-month (0.1% expected) and 2.4% year-over-year (2.3% expected). Core CPI — which strips out food and energy prices — rose 0.3% monthly and 3.3% annually, both above consensus estimates for the economic print.

KPMG Senior Economist Yelena Maleyev and Yardeni Research Chief Markets Strategist Eric Wallerstein join the Morning Brief team to speak more about the inflation data and its implications for the Federal Reserve's interest rate journey.

"Unfortunately, we're going to get some weather impacts in the jobs data in the coming months. But I think as long as inflation isn't getting towards 2% so dramatically, and there's no crisis that unfolds in the labor market, which I don't foresee, I don't think there's anything that gives the Fed reason to cut further this year," Wallerstein explains.

Maleyev turns to specific pricing components that could forecast the pathway for inflation.

"Components like food and energy are, of course, outside of the Fed's purview. Monetary policy can't support growing more food, creating more supply and energy markets. So that's why we tend to look at the core measure, which has been sticky, a lot of it due to shelter inflation," she says. "But we know shelter inflation is on its way down just based on how lagged the shelter inflation indicator inside the index is."

Furthermore, Malayev believes that the Fed will not fight inflation to the point of tipping into a recession. Wallerstein goes as far as to characterize the central bank as being more tolerant of higher inflation levels.

"The target is 2% and it's not going to move in terms of where it's set or what policymakers talk about. But I think the Fed now tolerates higher inflation, around 2.5%, much more much more than they used to. This whole average inflation targeting is coming back despite a 30 to 40% rise in prices cumulatively over just a few years." he explains.

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This post was written by Luke Carberry Mogan.