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

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