U.S. Inflation Rises to 3.4% in December
The latest data from the U.S. Bureau of Labor Statistics reveals that inflation in the country increased to 3.4% in December 2023. This represents a larger increase compared to the previous month’s 3.1% rise. The December inflation rate was in line with market expectations.
Core Inflation Eases to 3.9%
The U.S. CPI data also indicates that core inflation, which excludes food and energy prices, eased to 3.9% over the past 12 months, down from November’s 4.0% increase.
Market Expectations and Federal Reserve’s Interest Rate Decision
Market expectations were for core CPI to remain unchanged at 0.3% from the previous month, while year-on-year inflation was predicted to slow to 3.8%. Today’s CPI data will provide important insights into the Federal Reserve’s upcoming interest rate decision.
Investors have been speculating on the pace and extent of interest rate cuts by the Fed and other institutions throughout the year. Currently, traders are anticipating a reduction of 140 basis points (bps) this year, compared to the previously expected 160 bps cut by the end of 2023.
However, this is still higher than the Fed’s projection of a 75 bps cut for the year. Market indicators suggest a 69% chance of a rate cut as early as March.
Impact on Markets
The market has been range-bound following the release of the CPI data, awaiting the Fed’s decision on interest rates. The US Dollar Index is trading slightly higher, while crypto markets have experienced slight gains after the SEC’s approval of spot Bitcoin ETFs. Bitcoin is currently trading at over $48,034, up 6% in the last 24 hours.
According to Federal Reserve Bank of New York President John Williams, it is premature to call for rate cuts as inflation has not yet reached the central bank’s target of 2%. This suggests that today’s higher-than-expected CPI might influence the Fed to maintain steady rates instead of cutting them in the future.
Hot Take: U.S. Inflation Rises to 3.4% in December
The U.S. Bureau of Labor Statistics has reported that inflation in the country increased to 3.4% in December 2023, surpassing market expectations. This data will have a significant impact on the Federal Reserve’s upcoming interest rate decision and market dynamics. While investors have been anticipating interest rate cuts, today’s CPI numbers might lead the Fed to maintain steady rates instead of implementing further cuts. The market has reacted cautiously, with the US Dollar Index trading slightly higher and crypto markets experiencing slight gains. Overall, this inflation report will shape monetary policy decisions and investor sentiment moving forward.
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