The highly anticipated November CPI has come out less than expected hinting at inflation cooling down. CPI, or inflation data, rose 0.1% from the previous month and increased 7.1% from a year ago. Economists had been expecting a 0.3% monthly increase and a 7.3% 12 month rate.
Here are what the top banks were forecasting:
- 7.2% – Barclays
- 7.2% – Credit Suisse
- 7.2% – Goldman Sachs
- 7.2% – Bloomberg Econ
- 7.2% – Citigroup
- 7.2% – Morgan Stanley
- 7.2% – Wells Fargo
- 7.3% – HSBC
- 7.3% – JP Morgan Chase
- 7.3% – UBS
- 7.3% – Bank of America
- 7.4% – SocGen
Even though inflation is still high at 7.1%, the increase was tied for the lowest since November 2021.
If we exclude food and energy prices, core CPI rose 0.2% for the month and 6% on an annual basis compared to estimates of 0.3% and 6.1%.
Energy prices were down 1.6% for the month with falling gasoline prices, but the energy index is still up 13.1% from November 2021.
Food prices rose 0.5% and are up 10.6% from a year ago.
Shelter costs, which make up 1/3rd of the CPI weighting, rose 0.6% and is up 7.1% on an annual basis.
Real average hourly earnings rose 0.5% for the month, though they were still down 1.9% from a year ago.
“Cooling inflation will boost the markets and take pressure off the Fed for raising rates, but most importantly this spells real relief starting for Americans whose finances have been punished by higher prices,” said Robert Frick, corporate economist with Navy Federal Credit Union. “This is especially true for lower-income Americans who are disproportionately hurt by inflation.”
Now, all attention will be on the Federal Reserve tomorrow, who are expected to raise interest rates by 50 basis points.
But will the Fed pivot and adapt for a more dovish tone? Remember, the Fed wants to see multiple months of falling inflation data so they could dismiss this report as it is just one month’s data. It should also be noted that regardless of media headlines, inflation is still coming in at 7.1% which is higher than the Fed’s 2% threshold. There is still work that needs to be done, and I am sure Powell will remind investors about this.
CNBC says that Powell recently said that the services inflation excluding shelter costs will be an important component in determining future monetary policy moves. This gauge was changed little in November and is up nearly 7.3% from a year ago.
Investors cheered the lighter inflation report with US stock markets popping at the open. Since then, stocks have given up some of their gains. Why? Well, we still have the high risk Federal Reserve press conference tomorrow. Many traders will be waiting for that before making their moves. Another reason is that the stock markets tested key resistance levels:
Big pops but then sell offs right at the major resistance zones. We have been patiently awaiting for US markets to break above these recent highs. Yesterday, I highlighted these price levels in my Market Moment article. So far, we have bounced right at major support, but are rejecting resistance. A classic range play. We just need to daily candle close above these resistance levels to confirm a breakout and a Santa Claus rally to end the year.