Dec CPI rises a touch above expectations, keeps Fed on track
2025.01.15 09:13
NEW YORK (Reuters) – U.S. consumer prices increased slightly more than expected in November as energy costs rose, pointing to an inflation trend that lines up with the Federal Reserve’s view for a slower path of rate cuts this year.
The consumer price index rose 0.4% last month after climbing 0.3% in November, the Labor Department’s Bureau of Labor Statistics said on Wednesday. In the 12 months through December, the CPI advanced 2.9% after increasing 2.7% in November.
Estimates of economists polled by Reuters called for a monthly increase of 0.3% and 2.9% on a year-on-year basis.
MARKET REACTION:
STOCKS: U.S. stock index futures jumped to extend gains and E-minis were up 84.5 points, or 1.45%BONDS: The dropped and was last 8.4 basis points to 4.704%, while the two-year yield was 7.8 basis points lower to 4.287%FOREX: The weakened and was last off 0.42% to 108.74
COMMENTS:
BRIAN JACOBSEN, CHIEF ECONOMIST, ANNEX WEALTH MANAGEMENT, MENOMONEE FALLS, WISCONSIN
“It was a relief to see core inflation come in slightly lower than last month, but consumers are not getting any relief at the pump. Energy prices rose 4.3% for the month, although they are down 3.9% from a year ago. Consumer psyches have been scarred by the high inflation of last few years, so the Fed may err on the side of not cheering this report too much.
“The Fed is going through a long arduous process of rebuilding its credibility, so it will likely spend most of 2025 overreacting to upside surprises to inflation and underreacting to downside surprises with its messaging.”
PETER CARDILLO, CHIEF MARKET ECONOMIST, SPARTAN CAPITAL SECURITIES, NEW YORK
“The top line is a little disappointing, but I think that may have been due to food prices. And so if you look at the core, that was a little bit cooler and I guess that’s the good news.“
“I don’t think this changes the outlook for inflation, and I don’t think it changes the prospect of the Fed remaining cautious. And so judging from what I can see right now, the dollar is weakening, yields are coming off a bit, and so I suspect the core inflation is what the markets are looking at.”
“I don’t think the report really changes very much. Bottom line is inflation remains sticky.”
OLIVER PURSCHE, SENIOR VICE PRESIDENT, ADVISOR, WEALTHSPIRE ADVISORS, WESTPORT, CONNECTICUT
“We had a good inflation print yesterday, and we had a good one this morning. I think the market reaction is a pivot back to the Fed can lower rates if it wants to, as opposed to being boxed in a corner where higher inflation would keep them from acting. So, the reality is right now investors are looking at the data as kind of a Goldilocks scenario where you have strong corporate earnings, a very resilient and strong economy and lower inflation. You just can’t ask for more than that.”
