Nov U.S. CPI cools down, spelling relief for markets
FILE PHOTO: A person shops in a supermarket as inflation affected consumer prices in Manhattan, New York City, U.S., June 10, 2022. REUTERS/Andrew Kelly
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NEW YORK (Reuters) — U.S consumer prices barely rose in November amid declines in the cost of gasoline and used cars, leading to the smallest annual increase in inflation in nearly a year, which could give the Federal Reserve cover to start scaling back the size of its interest rate increases on Wednesday.
The consumer price index increased 0.1% after advancing 0.4% in October, the Labor Department said on Tuesday. Economists polled by Reuters had forecast the CPI gaining 0.3%.
In the 12 months through November, the CPI climbed 7.1%. That was the smallest advance since December 2021. Annual inflation is slowing in part as last year’s big increases drop out of the calculation, while Fed tightening is also dampening demand.
MARKET REACTION:
STOCKS: S&P 500 futures extended gains sharply and were up 2.8%
BONDS: The yield on 10-year Treasury notes tumbled and was down 15 basis points at 3.461%; The two-year U.S. Treasury yield was down 17.8 basis points at 4.225%.
FOREX: The euro extended a rally against the tumbling dollar, up 1.15%. The dollar index was off 1.1%
COMMENTS:
BRIAN JACOBSEN, SENIOR INVESTMENT STRATEGIST, ALLSPRING GLOBAL INVESTMENTS, MENOMONEE FALLS, WISCONSIN
“Rent inflation may be moderating sooner than many feared. The annualized monthly rate of core inflation was only 2.4% in November, down from 3.5% in October, and way lower than the 7.2% in September. If the inflation numbers stay where they are, we’re already close to peak tightness for where monetary policy should be. We’re likely one or two more hikes away from where the Fed is aiming.”
ART HOGAN, CHIEF MARKET STRATEGIST, B. RILEY, NEW YORK
«The Fed has raised rates pretty significantly over the course of this year and we’re starting to see the real results today. And I think what that tells us is that when the Fed meets tomorrow, they likely will have the ability to say we’re raising rates by less than what they have been, at 50 basis points, and the place at which we stop will likely be at 5%.»
«Now this is very much in line with what we’ve been thinking about for the coming year that inflation will slowly pull back. It pulls back more significantly in the first quarter as the housing sector starts to catch up with reality.»“Directionally and sequentially the CPI report for November is certainly better than anticipated, when expectations were for it to be pretty good. It shows that what the Fed has done is starting to take hold”
