Prices for goods and services continue to rise, although economists expect consumer inflation to likely fall in November. Fingers are crossed that November consumer inflation may show signs of cooling when the CPI is released.
Economists’ expectations for November consumer price inflation
According to Dow Jones, economists expected the consumer price index to rise 0.3 percent in November, or at an annual rate of 7.3 percent. That figure would be a reduction from the 7.7 percent recorded in October. Economists also expected the core CPI, less food and energy, to rise 0.3%, or 6.1% year-over-year. At the same time, the Dow Jones revealed a gain of 0.3% or a 6.3% annual rate in October. As the Fed meeting approaches, the central bank is expected to add 0.5 points to rates by Wednesday. At the same time, most economists expect the Fed to keep the 50 basis point hike regardless of the Consumer Price Index report.
Bank of America Merrill Lynch’s head of U.S. rates strategy, Mark Cabana, wrote:
“I think if the market sees something in line, all is good. If the theme continues, rates [les rendements obligataires] will probably go down a little bit more. But if we see something that surprises to the upside, I think that would generate a bigger market reaction because it would challenge the theme that the market has really latched onto – that inflation has peaked.”
Currently, the target range for federal funds is 3.75% to 4%, but economists expect the Fed to continue to raise interest rates until it reaches 5% or a bit higher. The upcoming CPI report is less likely to affect the Fed meeting, but it may indicate a longer-term path for interest rates. Prior to the November inflation report, Treasury yields were high Monday, as were stocks. The 2-year bond yield rose 0.005 percentage points to 4.39 percent. After the Fed releases its policy statement and latest economic and interest rate forecasts, Chairman Jerome Powell will hold his usual post-meeting press conference on Wednesday.
Jefferies chief financial economist Aneta Markowska also weighed in on the expected report:
“I think it will be another benign print. I’m pretty neutral on this report. It feels like the risks are symmetrically skewed higher. I think if the print is higher, the sale [d’actions] Will be disproportionately stronger.”
He also referred to the Fed chairman’s statement on the commodity slowdown. Meanwhile, Jefferies economists are eagerly awaiting the contents of the November inflation report.