Inflation data in the US did not shock the market. The results were not groundbreaking
The US inflation data, which the markets had been waiting for almost all week, did not surprise. They differ only slightly from the market consensus, which did not cause any confusion.
Yesterday’s inflation data from the US caused increased market volatility. We received a few surprises, but their scale was so small that at the end of the day there was no visible change in the USD value or Wall Street indices. Yields of American bonds increased immediately after the data, and then dropped dynamically in the following hours. The market still assumes that a March rate cut by the Fed is highly probable.
Inflation in the US did not surprise
Let’s take a closer look at the numbers. The results were not groundbreaking and slightly deviated from the market consensus. Consumer prices in the United States rose 0.3 percent in December. compared to November, this includes the basic CPI and excluding variable energy and food prices. The year-on-year rate increased from 3.1% to 3.4%. (forecast 3.2 percent) and “core” dropped from 4.0 percent. up to 3.9 percent A discount of up to 3.8 percent was assumed here.
The general trend of a moderate decline in inflation has not changed. This is evidenced primarily by the base indicator. The prices of services, which are largely influenced by salary costs, continue to grow relatively strongly.
What’s important for the Federal Reserve is that the final step in getting inflation back on target appears to be more difficult. In my opinion, the Fed will not cut interest rates in March, as the market expects, but only in May or June.
Exchange rates
The market reaction was unclear. The dollar initially gained in value, but in the following hours it gave back all the profit. EURUSD is still above 1.0950 this morning. Wall Street indices finally closed the day near their opening levels. Yields on US debt rose, then fell dynamically and approached the lows set at the end of last year.
The reading of producer inflation in the USA is scheduled for today. Neel Kashakari from the Fed, who belongs to the “hawkish” camp, will speak.
