Consumer price increases met expectations in November – but overall, inflation remains hot.
The sticky nature of printing is “a bit concerning,” Paul Ashworth, chief North America economist at Capital Economics, wrote on Wednesday. “But we don’t expect the Fed to be convinced to skip another 25 basis point rate cut at next week’s FOMC meeting.”
Immediately after the report, the markets Continue the price Another 25 basis point cut at next week’s central bank meeting, with the odds of a cut rising to 98.1% from around 89% a day ago.
“With markets approaching today’s numbers with fears of an upside surprise, the embedded number was received very positively,” wrote Seema Shah, chief global strategist at Principal Asset Management. “But overall, the Fed will be concerned about the stubborn nature of inflation and will be increasingly cautious about the upside inflation risks that President-elect Trump’s policies may bring.”
Economists consider that the policies proposed by Trump, such as higher tariffs on imported goods, corporate tax cuts, and restrictions on immigration, may be inflationary. These policies could further complicate the Fed’s path forward on interest rates.
“We expect the Fed to move off autopilot in January, adopt a more dovish tone, and only slow the pace of cuts at every other meeting,” Shah said.
Assuming a 25 basis point cut next week, markets are pricing in two or three more cuts in 2025, according to the latest Bloomberg data.
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