Some analysts see this as a win win because lower prices are good for consumers and the price dip may put downward pressure on inflation readings, which means the Fed can maintain stimulative low rates longer.
The Fed has said since March interest rates would stay low for a period after it completes a bond-buying program under the quantitative-easing stimulus strategy. Policy makers in July reduced monthly bond purchases to $25 billion in their sixth consecutive $10 billion cut.
The market impact from today's CPI report was to boost hopes for a continuation in the equity bull market, with S&P index futures rallying on the heels of the report. Bond traders were also comforted by the dip in the annual pace of inflation.