Uddrag fra Swissquote:
Headline CPI in the US is expected to have steadied on a monthly basis thanks to subdued energy prices and the yearly figure may have eased from 3.2% to 3.1% in November. Core inflation is seen steady at 4%. These numbers certainly look much better than what they did back in 2022, when we saw the US core inflation reach 6.6%. But at 4%, core inflation in the US is still twice the Federal Reserve’s (Fed) 2% policy target. And as the Fed Chair Powell will certainly say tomorrow, there is an encouraging progress in the Fed’s fight against inflation, but the job is not done just yet.
But because the whole monetary policy tightening is here to fight inflation, a softer-than-expected set of inflation figures could further boost the Fed doves and appetite in US bonds, but gains will likely remain limited before tomorrow’s Fed decision and economic forecasts. Although the Fed is happy with the current results – weakening inflation despite a healthy loosening in the job market and quite a resilient growth – Powell won’t cry victory on inflation and pop the champagne this week. If he did, the sovereign bond party would get out of control. The latter would send yields collapsing and loosen the financial conditions before time and interfere with the Fed’s plans to bring inflation down to 2%. Therefore, the chances are that the Fed will sound happy but cautious, no matter what we see in inflation print today.
Activity in Fed funds futures assesses 80% chance for a May rate cut and nearly 50% chance for a March rate cut. This week’s inflation data and Fed comments will shift these expectations toward one way or the other, but Powell will sure find it harder to control market optimism if headline inflation eased below the 3% psychological target, into the 2% waters… as yes, at 2 and something percent, we get really closer to the 2% target.
