EXECUTIVE SUMMARY
- Core CPI was on the soft side of expectations in December, at 0.225% M/M (vs unrounded analyst estimates we’d seen averaging 0.25%, range 0.22-0.29) after four months oscillating between 0.28-0.31% M/M.
- Rental inflation was broadly as expected whilst core services ex-rents and core goods were both on the soft side of expectations.
- There were very few large category misses skewing the modest softness on the month.
- The three-month core CPI run rate eased four tenths to 3.3% annualized (lowest since Sept) but the six-month run rate accelerated three tenths to 3.2% (highest since June).
- The Y/Y rate meanwhile inched lower from 3.32% to 3.24% Y/Y (exaggerating what looks like a miss on the 3.3% expected), with the six-month rate running just 5bps lower in a sign of recent stickiness.
- Core PCE tracking appears to be centering around the high 0.1s for December, with the Cleveland Fed tracking at 0.19% M/M and initial analyst estimates averaging at a similar pace, after the 0.115% in November.
- All told, it’s a moderately more dovish report than expected against a firmly hawkish market backdrop. That's helped see a large reaction with 2Y Tsy yields still ~7bps lower more than four hours post-release, whilst Fed Funds futures have brought the next Fed cut another meeting closer to July.
PLEASE FIND THE FULL REPORT HERE: USInflationInsightJan2025.pdf
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