Inflation news bolsters Fed

The latest evidence of cooling inflation not only reinforced the Federal Reserve’s likely decision for a smaller interest-rate hike this week – it also bolsters the hand of dovish officials to push for a further downshift and then go on hold.

A key gauge of the U.S. consumer price index – so-called core inflation, which excludes food and energy – posted its smallest monthly advance in more than a year last month, according to a Labor Department report published Tuesday.

The moderation was broad-based, with an indicator of services prices favored by Fed Chair Jerome Powell also decelerating.

The U.S. central bank is expected to raise the target range for its benchmark interest rate by a half-percentage point Wednesday, to 4.25 to 4.5%, following four straight moves of 75 basis points.

Officials will also unveil updated quarterly projections for how high they project rates going next year.

Investors react to inflation data

U.S. stocks advanced on Tuesday as investors mulled whether latest data showing prices rose less than forecast last month would prompt the Federal Reserve to alter its aggressive approach to battling inflation.

The S&P 500 and the Nasdaq 100 capped a volatile session with a gain after data indicated the worst of inflation has likely passed.

The soft consumer price index data was briefly celebrated with a surge in equities, but the indexes pared those gains as investors turned their focus to what the latest numbers mean for the Fed’s path of rates.

From wire reports