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US CPI Declined to 3.1% in November

Miguel A. Rodriguez
Miguel A. Rodriguez
13 December 2023

The eagerly awaited release of the US Consumer Price Index (CPI) yesterday showed that inflation has softened. Now investors are waiting for the Federal Reserve’s (Fed) interest rate decision today. 

US Inflation Fell to 3.1% As Expected

Yesterday’s latest inflation data was eagerly awaited before today's Fed’s meeting, the last of this year.

The CPI fell to 3.1% last month, slowing from 3.2% in October, according to data from the Bureau of Labour Statistics on Tuesday. Month over month, the reading increased 0.1%.  

Economists had predicted 3.1% and 0.0%, respectively.

The core figure, closely followed by the Fed and investors as it greatly reflects the structural price trend, increased 4.0% annually. It is unchanged from the previous month. On a monthly basis, the core CPI rose 0.3%, slightly up from 0.2% the previous month. The economists' estimates coincided with the published data.

The November CPI does not provide many clues to help make a clear prediction of the Fed's next steps.

Options as to When Rates Will be Cut are Divided

The data was very close to the estimates and showed no surprises. As this is the case, the impact on the market was not relevant, and the analysts' opinions after the CPI were diverse.

On the one hand, the figures seem to reinforce bets that the Fed will choose to keep interest rates high for some time somewhat longer than expected. Given that the decline in inflation is not enough, this could mean that high rates may be extended into the second quarter. Some analysts predict that the central bank will begin cutting rates as soon as early next year.

Fed Chairman Jerome Powell has emphasized in recent statements that they will continue to act "carefully" as long as they do not find clear evidence that high inflation has come to an end.

Fed’s Press Conference Today May Provide More Clues

Today any doubts may be settled at the press conference held after the interest rate meeting, or at least that is what traders will be looking for.

Interest rates are expected to remain unchanged at the meeting. What will be of great interest will be the economic forecasts which, together with what Powell may say about the future of economic policy, could set the course of the market over the coming days.

The Stock Market Continues to Gain While Oil Falls

For now, the stock market remains buoyant and has added another day of increases in a rally that has lasted almost two months without interruption. Probably, the fall in energy prices is influencing the good mood of investors since they will contribute to the decrease in inflation and lower interest rates.

WTI oil yesterday fell to levels not seen since June and is technically approaching the support zone around $67.

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Crude Oil daily chart, December 13, 2023. Source: CAPEX.com WebTrader.    

Key Takeaways

  • US CPI fell to 3.1% last month.
  • The inflation data was in line with predictions, so it did not impact the market.
  • Analysts are divided as to when they believe the Fed will start cutting rates.
  • The press conference held after the interest rate decision may give more clarity.
  • The stock market continues to gain.
  • WTI oil fell yesterday and approached the $67 area.

Related Articles:

Sources: Bloomberg, Reuters 

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Miguel A. Rodriguez
Miguel A. Rodriguez
financial_writer

Miguel worked for major financial institutions such as Banco Santander, and Banco Central-Hispano. He is a published author of currency trading books.