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MNI US Inflation Insight, Nov'23: Core CPI Miss Sparks Significant Risk Rally

Core CPI printed softer than expected for October with a particularly sharp driver but also a broader deceleration across categories

HomepageInflation InsightMarkets

EXECUTIVE SUMMARY

  • Core CPI inflation surprisingly cooled to 0.23% M/M in October from 0.32% M/M.
  • It was helped by an unexpectedly large decline in hotel prices, a typically volatile item, but the supercore slowing sharply on the month and other upside risks not materializing drove a significant rally in FI and the USD index down 1.5% for its largest daily decline since Nov 2022.
  • Chair Powell’s IMF remarks had helped open the door to further tightening, at least at the margin, but this report has firmly shut that door whilst there are now just shy of 100bps of cuts to end-2024 (to a late almost 75bps lower than that implied by the FOMC’s hawkish dot plot in September).
  • Particularly elevated sensitivity to data likely sees further swings ahead of the December FOMC almost a month away on Dec 13, including another payrolls and CPI round.

PLEASE FIND THE FULL REPORT HERE:

USInflationInsightNov2023.pdf

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EXECUTIVE SUMMARY

  • Core CPI inflation surprisingly cooled to 0.23% M/M in October from 0.32% M/M.
  • It was helped by an unexpectedly large decline in hotel prices, a typically volatile item, but the supercore slowing sharply on the month and other upside risks not materializing drove a significant rally in FI and the USD index down 1.5% for its largest daily decline since Nov 2022.
  • Chair Powell’s IMF remarks had helped open the door to further tightening, at least at the margin, but this report has firmly shut that door whilst there are now just shy of 100bps of cuts to end-2024 (to a late almost 75bps lower than that implied by the FOMC’s hawkish dot plot in September).
  • Particularly elevated sensitivity to data likely sees further swings ahead of the December FOMC almost a month away on Dec 13, including another payrolls and CPI round.

PLEASE FIND THE FULL REPORT HERE:

USInflationInsightNov2023.pdf