NOVEMBER CORE CPI GAIN SOLIDIFIES EXPECTATIONS FOR FED RATE CUT NEXT WEEK

NOVEMBER CORE CPI GAIN SOLIDIFIES EXPECTATIONS FOR FED RATE CUT NEXT WEEK
Core CPI Gain: The November core CPI increase of 0.308% has reinforced expectations for a Federal Reserve rate cut at next week's meeting.
Inflation Stickiness: Four consecutive monthly gains of 0.3% in the core CPI index have driven the three- and six-month annualized rates to multi-month highs, indicating persistent inflationary pressures.
Annualized Rates:
The three-month seasonally adjusted annualized rate (SAAR) rose to 3.7%, the highest in seven months, up from a low of 1.6% in July.
The six-month SAAR increased to 2.9%, a five-month high, showing a slight rise from the previous cycle low of 2.6% in October.
Core Goods Inflation: Core goods saw a notable 0.308% monthly gain, the largest since May 2023, which adds complexity to the Fed's inflation outlook.
Cooling in Core Services: Core services inflation slowed to 0.276%, with rent and owners' equivalent rent (OER) seeing their smallest increases in years, reflecting a cooling in shelter costs.
Fed’s View on Housing Services: Fed Chair Jerome Powell has indicated that elevated housing services inflation may be a "catch-up" effect, which could provide some reassurance to policymakers.
Future Fed Rate Cuts: While a rate cut is expected next week, the ongoing uneven inflation dynamics suggest that the Fed may adopt a slower pace of rate cuts in 2025.
Challenges for the Fed: Despite the expected rate cut, the Fed faces challenges due to persistent inflation in certain sectors, especially in core goods and services.