The United States announced on Tuesday (13th) that the consumer price index (CPI) in November increased by 7.1% year-on-year, lower than market expectations of 7.3%, and a sharp drop from the previous value of 7.7%, the smallest monthly increase since January this year; The November core CPI of energy costs increased by 6% year-on-year, which was lower than the market’s expected 6.1% and the previous value of 6.3%. As the inflation index fell, the Federal Reserve (Fed) decided to raise interest rates by two yards in the early hours of Thursday (15th) Taiwan time.
On a monthly basis, November CPI grew by 0.1%, far below market expectations of 0.3% and the previous value of 0.4%; November core CPI growth was 0.2%, lower than market expectations and the previous value of 0.3%. Inflation began to cool down amid the sharp rate hikes, and the core inflation rate in November, which has attracted much attention from the market, dropped significantly.
Falling used car, energy prices offset growth in food prices
Judging from the details of the data released by the U.S. Department of Labor on Tuesday, used car and energy prices fell sharply, which was one of the driving forces behind the cooling of inflation in November. Among them, the decline in energy prices offset the rise in food prices.
Food prices, which are more volatile, grew by 0.5% in November, slightly higher than the previous value of 0.6%; energy prices fell by 1.6% month-on-month, reversing the 1.8% increase in October, of which gasoline prices fell by 2% month-on-month, lower than the previous growth4 %. In addition, air ticket prices fell by 3%, the previous value fell by 1.1%, second-hand car prices fell by 2.9% month-on-month, which was higher than the 2.4% drop in October, and medical service prices fell by 0.7% month-on-month, and the previous value fell by 0.6%.
Housing costs post smallest gain in 4 months, service prices slow markedly
Notably, housing costs rose 0.6% in November, the smallest gain in four months, with the report showing that housing was by far the biggest contributor to the overall CPI rise. Housing costs are the largest component in the services sector, accounting for regarding one-third of the overall CPI index.
While rents rose 0.8 percent in November and landlord’s equivalent rent rose 0.7 percent, the cost of staying away from home fell 0.7 percent following surging in October. Private sector data show that rents have stabilized in many cities across the United States, but there is a time lag between real-time changes and Labor Department data.
In addition, core commodity prices fell for two consecutive months in November, down 0.5%, and service prices excluding energy rose 0.4%, the smallest increase since July. Fed Chairman Jerome Powell recently emphasized the importance of another measure of inflation, the core personal consumption expenditures price index (PCE), which he said is an important category to understand the future evolution of core inflation.
expert opinion
Bloomberg economists Anna Wong and Eliza Winger said the unexpectedly weak CPI in November was further evidence that deflation is taking shape, and that by the end of January when the Federal Open Market Committee (FOMC) meets, some Fed officials may conclude that ” There is sufficiently convincing evidence that inflation is falling” conclusion, and then began to talk regarding pausing interest rate hikes.
Greg Bassuk, CEO of AXS Investments, said that he is optimistic regarding the soft landing of the U.S. economy in the future. As time goes on to 2023, the market will still fluctuate due to inflation and other economic data. At the same time, he will also look for the Fed’s future currency from these data policy thread.
Robert Frick, a corporate economist at the Navy Federal Credit Union, said that inflation will not only boost stock market performance, but also ease the pressure on the Fed to raise interest rates, but the most important thing is that the American people who have suffered from rising prices are finally really relieved .
In addition, before the November CPI data came out, the two major Wall Street investment banks, JPMorgan Chase and Goldman Sachs, both released their forecasts for the stock market trend. The 7.1% data means that JPMorgan Chase and Co.S&P 500 IndexThe future is bullish by 2% to 3%, while Goldman Sachs estimates a rise of 4% to 5%.
Market Reaction
After the data came out, major U.S. stock indexes opened higher across the board, but then narrowed their gains sharply. before the deadline,Dow Jones Industrial Averagerose more than 250 points or 0.75%,Nasdaq Composite Indexrose nearly 230 points or nearly 2.1%,S&P 500 Indexup nearly 1.5%,Philadelphia SemiconductorThe index rose nearly 2.4 percent.
U.S. 10-Year Treasury Bond YieldIt fell below the recent 3.5% level to 3.467%,dollar indexIt fell below the 104 level and is now at 103.945.
The CME Group FedWatch Tool shows that the probability of the Fed raising interest rates by 2 yards (50 basis points) on Thursday is 79.4%, and the probability of raising interest rates by 3 yards (75 basis points) is 20.6%. The terminal interest rate next year will fall in the range of 4.75% to 5%. .
