Traders Prepare for Upcoming Key Inflation Data Releases
US equity markets were muted as traders await key inflation data. November’s consumer price index (CPI) report will be released tomorrow, followed by the producer price index (PPI) report on Thursday morning.
Inflation Data Expectations
Analysts anticipate November’s annual CPI figure at 2.7%, an increase from October. Core CPI, excluding volatile food and energy prices, is projected to show a 3.3% annual increase and a 0.3% month-over-month increase in November.
Housing costs are a focus after the shelter index rose by 0.4% in October. Other monthly increases in October included used cars and trucks (+0.3%), medical care (+0.3%), and airline fares (+3.2%), attributed to higher fuel prices and increased holiday travel demand.
Jobs Report Analysis
The previous week featured a "Goldilocks" jobs report, with the economy adding 227,000 jobs in November, exceeding the expected 202,000 and significantly up from 36,000 in October. However, hourly wages rose 4% annually, surpassing expectations, and unemployment increased to 4.2% from 4.1%. Initial jobless claims rose by 9,000 to 1.91 million, marking the highest level since November 2021, indicating a challenging labor market.
Interest Rate Outlook
Fed funds futures markets indicate an 86% probability of a 25 basis point interest rate cut next week, aligning with earlier guidance from Fed officials. Future actions by the Fed in 2025 remain uncertain, with Governor Michelle Bowman advocating for a cautious approach following her dissent on a previous rate cut.
The year 2025 may see the return of a familiar president with varied economic policies, suggesting potential shifts in market dynamics.