Fed Eyes December Rate Cut as November CPI Data Aligns with Expectations
1min read Recent data released by the U.S. Bureau of Labor Statistics showed that the Consumer Price Index (CPI) for November increased by 2.7% year-over-year, aligning with market expectations and marking a slight rise from the previous month’s 2.6%. Additionally, the core CPI, which excludes volatile food and energy prices, also met expectations with a 3.3% rise, maintaining its previous pace.
The CPI figures, in line with forecasts, have reinforced expectations among traders for a potential rate cut by the Federal Reserve in December. This sentiment has been reflected in the financial markets, as equity futures saw modest gains, with Nasdaq 100 futures expanding by 0.38%. Concurrently, spot gold experienced a brief uptick of approximately $5, and the yield on the U.S. 10-year Treasury note saw a slight drop, indicating a nuanced response from investors.
The Federal Reserve's monetary policy remains closely watched, particularly in the context of the latest CPI data. Sal Guatieri, a senior economist at BMO, noted that the report offers encouraging signs for the Fed, with indications of a potential easing in rental inflation. However, challenges remain, particularly with healthcare costs, where continuity in the inflationary trend remains uncertain.
The probability of a third consecutive Federal Reserve rate cut has exceeded 90%, as shown by federal funds futures. As the year-end meeting of the Federal Open Market Committee approaches, there is a widespread expectation that monetary easing will continue to support the labor market.
Looking forward, there is a broad consensus that potential trade policies and tariff implications under the new administration could introduce further inflationary pressures, impacting the Fed’s policy decisions. This environment underscores the intricate balance the Fed must maintain as it navigates through evolving economic indicators and geopolitical influences.
