Consumer price increases met expectations in November — but overall, inflation still remains hot.
The sticky nature of the print “is a little disconcerting,” Paul Ashworth, chief North America economist at Capital Economics, wrote on Wednesday. “But we don’t expect it to persuade the Fed to skip another 25bp rate cut at next week’s FOMC meeting.”
Immediately following the report, markets continued to price in another 25 basis point cut at the central bank’s meeting next week, with the odds of a cut rising to 98.1% from about an 89% chance one day prior.
“As markets came into today’s figure with fears of an upside surprise, the in-line number is being received very positively,” wrote Seema Shah, chief global strategist at Principal Asset Management. “But overall, the Fed will be concerned by the very stubborn nature of inflation and will be increasingly cautious about the upside inflation risks that President-elect Trump’s policies may bring.”
Trump’s proposed policies, such as high tariffs on imported goods, tax cuts for corporations, and curbs on immigrationm are considered by economists to be potentially inflationary. Those policies could further complicate the Fed’s path forward for interest rates.
“We expect the Fed to move off autopilot in January, adopting a more cautious tone, and slowing its pace of cuts to just every other meeting,” Shah said.
Assuming a 25 basis point cut next week, markets are pricing in another two to three cuts in 2025, according to the latest Bloomberg data.
