U.S. inflation pressures slowed again in November, but core price pressures held steady for a second month, potentially enabling the Federal Reserve to maintain its 'higher-for-longer' interest-rate stance well into 2024.
The headline consumer price index for November was pegged by the Commerce Department at 3.1%, slowing modestly from the prior month's tally of 3.2% and matching Wall Street's consensus forecast. The figure was powered largely by falling oil and energy prices and a near 8% slide in domestic gasoline.
On a monthly basis, inflation edged 0.1% higher, compared with unchanged readings in October and September and the 0.6% gain tallied in August.
So-called core inflation, which strips out volatile components like food and energy, held at 4%, the lowest in two years, while the monthly reading of 0.3% also matched Wall Street forecasts.
"After all the hopes and chatter around near-term rate cuts, today’s CPI report is a little bit of a mood dampener," said Seema Shah, chief global strategist at Principal Asset Management. "Monthly core inflation did not slow in November, picked up slightly on the headline measure, and even sped up on the supercore measure"
"Simply put, this isn’t enough inflation deceleration to reassert or justify the market’s policy easing expectations, particularly at a time when the labour market is still so solid," she added. "Tomorrow, Powell should push back at the recent market narrative. And if he doesn’t, we’ll know exactly where the Fed stands."
U.S. stocks pared modest gains following the data release with the S&P 500 essentially unchanged from last night's close, the highest of the year, in the opening hour of trading while the Dow Jones Industrial Average gained 50 points and the tech-focused Nasdaq added 21 points.
CPI’s categories: pic.twitter.com/etD7tkhINI
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Benchmark 10-year Treasury note yields edged 4 basis points higher following the data release to change hands at 4.235% while 2-year notes were pegged at 4.729%, 5 basis points higher from prior to the data release.
The U.S. dollar index, which tracks the greenback against a basket of its global peers, was marked 0.12% lower at 103.969.
CME Group's FedWatch has long discounted the chances of a Fed rate move later this week in Washington, but pegs the chances of a quarter-point cut in March at around 47.4%.
Bets on a May reduction, meanwhile, leaped to 82.2% from just 33% only a month ago.
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