US Markets Steady Ahead Of Key Inflation Data Release
According to Blockworks, US equity markets remained stable on Tuesday as investors awaited crucial inflation data. The consumer price index (CPI) report for November is set to be released on Wednesday, followed by the producer price index (PPI) report on Thursday. Analysts expect the annual CPI figure for November to reach 2.7%, a slight increase from October. Core CPI, which excludes volatile food and energy prices, is anticipated to show a 3.3% annual rise and a 0.3% month-over-month increase. Housing costs will be closely watched after the shelter index rose by 0.4% in October. Other indexes that saw increases in October include used cars and trucks, medical care, and airline fares, with the latter seeing a significant rise due to higher fuel prices and increased demand ahead of holiday travel.
The backdrop for this week's inflation data is a generally positive jobs report from last week. The economy added 227,000 jobs in November, surpassing the expected 202,000 and significantly higher than the revised 36,000 positions added in October. However, there were some concerning figures in the report. Hourly wages increased by 4% annually in November, slightly above expectations, and unemployment rose to 4.2% from 4.1% in October. Additionally, initial jobless claims showed an increase in continuing claims, reaching the highest level since November 2021.
Despite these mixed signals, the Federal Reserve's futures markets are confident, with an 86% probability, that the Federal Open Market Committee (FOMC) will opt for a 25 basis point interest rate cut next week. This aligns with previous statements from Fed officials, and Chair Jerome Powell is known for avoiding market surprises. Looking ahead to 2025, the Fed's approach remains uncertain, with officials suggesting a slower pace of rate cuts. Governor Michelle Bowman, who previously dissented on a larger rate cut, emphasized the need for caution. Additionally, 2025 will see a new presidential term, potentially bringing changes in economic policies. Investors are advised to prepare for potential shifts in the economic landscape.