US November CPI matches expectations, Fed rate cut likely ahead

Key Takeaways

US consumer prices rose 2.7% annually in November, keeping inflation above the Federal Reserve’s 2% target.
Traders are anticipating a quarter-point reduction in the federal funds rate at the upcoming Federal Reserve meeting.

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Fresh November CPI data out Wednesday showed consumer prices increased as expected, keeping the Federal Reserve on track for a rate cut next week, especially when the November jobs report released earlier this month indicated solid job growth.

The Consumer Price Index climbed 0.2% month-over-month, matching both October’s increase and economist estimates, according to Bureau of Labor Statistics data released Wednesday.

Core CPI, which excludes volatile food and energy prices, increased 0.3% from October and maintained a 3.3% annual rate, meeting analyst expectations.

The inflation report comes as markets widely expect the Fed to cut interest rates at its December 17-18 meeting. Traders are pricing in an 86% probability of a quarter-point reduction in the federal funds rate, according to CME Group’s FedWatch tool.

The November jobs report, which showed a robust 227,000 job gain, further solidified the case for easing monetary policy. The figure surpassed surpassing expectations and marked a robust rebound from the previous month’s lackluster performance.

The figure not only exceeded the Dow Jones consensus estimate of 214,000 but also reflected upward revisions in job gains for October and September, bringing the three-month average payroll growth to 173,000.

While inflation has cooled substantially from its peak of around 9% in June 2022, recent data suggests prices are stabilizing at levels above the Fed’s target.

Bitcoin traded above $98,000 ahead of the inflation data release, recovering from a recent dip below $94,000. The crypto asset has gained 2% in the last seven days, per CoinGecko data.

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