The CPI in monthly terms falls 0.1%, compared to the 0.1% rise in November. For its part, the core CPI rose 5.7% in year-on-year terms in December (as expected and compared to 6.0% in the previous month) and in monthly terms rose 0.3% (compared to 0.2% former).
“The Fed will continue to raise rates to cool demand and restore balance. Higher interest rates discourage job creation and the number of vacancies available, reducing the pressure on wages. The market anticipates that the Fed will raise an additional 50 basis points reaching a terminal rate of 4.75%/5.00% in March. The setback in the CPI provides arguments for the central bank not only to moderate the rate of increases but also to open the discussion about a possible pause”, they explained in Bankinter by Reuters.
For Naeem Aslam, chief market analyst at AvaTrade at Bolsamanía, he opined that “US inflation is in line with expectations. Although this is good news, market players have been waiting for the number to show a little more improvement and this has brought bullish dollar bets back into the market.”
“However, by any metric, this number is much better than the previous reading and inflation is moving in the right direction, which should keep some pressure on the Federal Reserve.”
John Leiper, investment director of Titan Asset Management, considered that the data “it’s good news, the direction of travel is good news, but of insufficient magnitude to divert the Fed and Jerome Powell from their hawkish stance.”
“That’s interesting because market prices imply a tiny 30% chance that the Fed will raise more than a quarter point at its February meeting. That’s at odds with comments from Fed committee members about the charge anticipation of the remaining rate increases and indications that the terminal rate may well be set above 5%,” he concluded.
Source: Ambito
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