Cold CPI, Will the Fed Cut Again?
The Federal Reserve (The Fed) believes the latest economic data indicates that inflation is starting to ease, but the central bank doesn't appear to be in a rush to cut interest rates further. Its primary stance remains "wait for certainty," as a single data release isn't enough to change policy direction.
Market attention is focused on lower-than-expected US inflation in November, with CPI at 2.7% (yoy) and core CPI at 2.6% (yoy). These figures have strengthened hopes of an interest rate cut next year, as price pressures appear to be easing.
However, this inflation data is also not considered as "clean" as usual. The data collection process was impacted by the government shutdown, so some market participants believe the results need to be confirmed by subsequent releases before making any major decisions.
At its last meeting, the Fed lowered interest rates to the 3.50%–3.75% range. However, the Fed's tone of communication remained cautious, emphasizing that further action will depend heavily on the consistency of inflation data and overall economic conditions.
On the labor front, the relatively low weekly jobless claims data indicates the economy hasn't weakened sharply. This is another reason for the Fed to be cautious, as cutting rates too quickly risks triggering a rebound in inflation.
Due to this mixed combination of data, the market tends to see a strong likelihood that the Fed will hold interest rates at its next meeting, while leaving room for a cut if the lower inflation trend persists and economic activity begins to cool.
In conclusion, the Fed likely views the latest data as support for gradual easing, rather than aggressive cuts. The focus will be on a series of subsequent data—particularly inflation and purchasing power signals—to determine whether this "cold inflation" is truly a trend, or just a temporary pause. (asd)
Source: Newsmaker.id
