The U.S. Consumer Price Index (CPI) for November showed a slowdown in inflation. Not only does it increase the likelihood that the Federal Open Market Committee (FOMC) will decide to raise rates more modestly at this week’s meeting, but dovish officials are calling for a further slowdown in the pace of tightening and keeping rates unchanged thereafter. lead to strengthening.
According to the November US CPI data released on the 13th, the core CPI, which excludes the highly volatile food and energy items, showed the lowest growth in more than a year on a month-on-month basis. The slowdown in inflation has been widespread, and a measure of service prices, a key focus of Fed Chairman Jerome Powell, has also softened.
U.S. Core CPI Grows at Lowest in More Than a Year, Justifying Slower Rate Hikes (3)
The FOMC is expected to raise the target for the federal funds (FF) interest rate by 0.5 points to 4.25-4.5% at its decision meeting on the 13th and 14th. Until the previous meeting, it had increased by 0.75 points for four consecutive meetings. Quarterly policy rates and economic forecasts will also be released after this meeting.
FOMC participants likely had already compiled their policy rate and economic forecasts before the November CPI data, and the Fed said it was inevitable that the rate peak forecast would be revised upwards to around 5%. Watchers are watching. Still, he said, the latest CPI rate strengthens the case for continuing to slow the pace of tightening.
“FOMC participants’ forecasts were likely solidified prior to the weekend and will not be reflected in today’s data,” said Anita Markowska, chief financial economist at Jefferies. “I myself had expected another 0.5 percentage point rate hike next February, but now dovish officials will be pushing for 0.25 percentage points. I’m sure it did,” he said.
news-rsf-original-reference paywall">Original title:Fed Doves’ Case for Rate Pause Bolstered by Inflation Slowdown(excerpt)