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MNI US Macro Weekly: Inflation Data Keep Fed Cut On Track

Latest inflation and (to a lesser extent) labor market data all but confirmed a Fed rate cut next week.
USCentral Bank NewsHomepageFederal ReserveMarketsStoryNorth America

Executive Summary

  • Inflation and (to a lesser extent) labor market data all but confirmed a Fed rate cut next week as futures market-implied probability of a 25bp reduction (to 4.25-4.50%) on Dec 18 shifted up from ~80% to 95+%.
  • Core CPI inflation was a little stronger than expected in November at 0.31% M/M (cons 0.28), but the more important reading for the Fed - core PCE - looks set to come in closer to 0.1% M/M than the 0.2% consensus prior to this week’s inflation data.
  • The labor market data also came in on the soft side. Nonfarm productivity data were as expected in the final Q3 release but ULCs saw some notably dovish revisions. Initial jobless claims were firmly higher than expected at 242k (sa, cons 220k) in the week to Dec 7, the highest single week since Oct 12.
  • Those data reinforced the FOMC on track to cut but macro and political developments have heightened uncertainty over its next moves. We explore the potential meeting outcome in our FOMC preview.
  • Key releases that could color the tone of the Fed’s communications include preliminary December PMI on Monday and November retail sales on Tuesday, while other important data later in the week includes the PCE report Friday.

PLEASE FIND THE FULL REPORT HERE: 

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Executive Summary

  • Inflation and (to a lesser extent) labor market data all but confirmed a Fed rate cut next week as futures market-implied probability of a 25bp reduction (to 4.25-4.50%) on Dec 18 shifted up from ~80% to 95+%.
  • Core CPI inflation was a little stronger than expected in November at 0.31% M/M (cons 0.28), but the more important reading for the Fed - core PCE - looks set to come in closer to 0.1% M/M than the 0.2% consensus prior to this week’s inflation data.
  • The labor market data also came in on the soft side. Nonfarm productivity data were as expected in the final Q3 release but ULCs saw some notably dovish revisions. Initial jobless claims were firmly higher than expected at 242k (sa, cons 220k) in the week to Dec 7, the highest single week since Oct 12.
  • Those data reinforced the FOMC on track to cut but macro and political developments have heightened uncertainty over its next moves. We explore the potential meeting outcome in our FOMC preview.
  • Key releases that could color the tone of the Fed’s communications include preliminary December PMI on Monday and November retail sales on Tuesday, while other important data later in the week includes the PCE report Friday.

PLEASE FIND THE FULL REPORT HERE: 

Keep reading...Show less