2024-01-11 13:55:00
Last December, the U.S. Consumer Price Index (CPI) rose 3.4% compared to the previous year, slightly exceeding the market forecast of 3.2%. Although U.S. inflation is slowing, prices are higher than expected as it overlaps with the year-end consumption season. Immediately following the CPI index came out this morning, major index futures on the New York Stock Exchange all turned to a downward trend. The market’s attention is focused on whether expectations of a March cut by the U.S. Federal Reserve will become reality.
On the 11th (local time), the U.S. Department of Labor announced that the CPI increase rate in December last year was 3.4% compared to the previous year and 0.3% compared to the previous month. Compared to the previous month, it slightly exceeded the market forecast (0.2%). The core CPI increase rate, excluding highly volatile food and energy, was 3.9% compared to the previous year, exceeding the market forecast (3.8%).
The main culprit that led to the rise in CPI in December last year was housing costs. It increased by 6.2% compared to the previous year and by 0.5% compared to the previous month. Additionally, energy prices rose 0.4% over the month, with gasoline offsetting the decline in natural gas. Even in the durable goods sector, which had been on a downward trend and even had a display forecast, there were some signs of an upward trend once more. The used car index fell 1.3% compared to the previous year, but rose 0.5% in December compared to the previous month, following 1.6% in November last year.
As the U.S. CPI in December of last year was found to be slightly higher than market expectations, attention is focused on how it will affect the Fed’s interest rate cut timing. According to the Chicago Mercantile Exchange’s FedWatch, policy interest rate futures investors estimate the likelihood of an interest rate cut in March next year to be around 65% immediately following the CPI announcement. It appears to have decreased slightly compared to 70% just before the announcement.
Previously, high-ranking officials at the Federal Reserve raised concerns regarding the market, such as New York Fed President John Williams, the ‘right hand man’ of Federal Reserve Chairman Jerome Powell, who said, “The current interest rate (5.25-5.5%) should be maintained for a while until inflation falls to 2%.” They are wary of the possibility that an early interest rate cut might overheat the market and act as a factor in rising inflation.
Financial experts have mixed views on when the price will be cut. Jan Hatzius, chief economist at Goldman Sachs, predicted at the think tank Atlantic Council Forum on the 9th of this month, “The first 0.25 percentage point cut will be implemented in March, and a total of five interest rate cuts will be made by the end of the year.” He said, “It will be difficult to enter the 2% range by the end of January, but the core personal consumption expenditures (PCE) price index, the Fed’s preferred price index, will fall to 2.2% in the second quarter (April to June),” he said. “It is a reasonable time for interest rate cuts to begin,” he analyzed. On the other hand, Ellen Zentner, chief U.S. economist at Morgan Stanley, predicted, “The Federal Reserve will begin lowering rates in June,” and added, “The Federal Reserve can be patient and take its time.”
New York = Correspondent Kim Hyun-soo [email protected]
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