Today's CPI report - the final important economic report of 2024 - came on the screws with every Inflationary metric coming in as expected (if somewhat hotter when looked at a bit closer). Still, the market was relieved that the print did not beat estimates (as some whispers hinted), and for many this was enough to assure that the Fed cuts rates by 25bps next week before potentially pausing in January. Many... but not all.
As the following kneejerk reaction snapshots from a selection of Wall Street analysts, strategists and economists suggests, even today's print wasn't enough to assure everyone that a 25bps cut is a done deal, even if market implied odds are now up to 97.9%
Below we excerpt several key post-CPI soundbites:
Neil Birrell, Premier Miton Investors
"This report will give the Fed confidence. Investors will also take heart, as the lack of a surprise, good or bad, allows for more certainty in decision making in the short term.”
David Russell, head of market strategy at TradeStation:
“No news is good news. Inflation has stopped falling, but it isn’t enough of a problem to derail this bull market. Inflation and the Fed are becoming less of a catalyst. Attention could now shift to the incoming administration’s tariff policy.”
Brian Coulton, chief economist at Fitch Ratings:
“The decline in core goods prices – which was a big part of the overall disinflation story this year – looks to be over, with core goods prices rising 0.3% month-on-month as car prices jumped. Services inflation is coming down but only very slowly – as rental inflation proves stubborn – and, at 4.6%, remains far higher than pre-pandemic rates.”
Anna Wong, head of Bloomberg Economics:
“November’s sturdy core CPI reading will inflame worries among the FOMC minority that disinflation has stalled. True, housing-rent inflation finally stepped down — as market rents have long suggested — but goods prices have lost disinflation momentum. The current monthly inflation pace is consistent with an annual inflation rate above 3%, not with the Fed’s 2% target. The November CPI report likely implies that the Fed’s preferred price gauge, the core PCE deflator, may edge up to 2.9% for the last two months of 2024. We still think the FOMC is slightly more likely than not to cut rates again in at December’s meeting, but we don’t think it’s a done deal.”
Nick Timiraos, Fed Mouthpiece, WSJ
"Falling prices (deflation) of core goods over the last 18 months helped deliver a decent chunk of the disinflation we've seen. That has now ended, with higher car prices pushing up core goods 0.3% on the month (after +0.05% in October and +0.17% in September)."
Lael Brainard, Biden's National Economic Adviser:
“For four months in a row now, inflation has been close to the level right before the pandemic. While price increases have been hard for working families, household incomes are up almost $4,000 more than prices during this Administration. We will continue to fight to lower costs for American families.”
Jeffrey Roach of LPL Financial:
“Roughly a third of the inflation metric is ‘Owners’ Equivalent Rent,’ an imputed value and not a realized expense for homeowners. Wages are growing faster than inflation, putting consumers on good footing as they enter the new year. The Fed will likely stay on course to slowly and methodically cut rates as the more sticky components of inflation are stabilizing.”
Ira Jersey, Bloomberg Rates strategist:
“Inflation is all services these days, which of course is in large part housing-related, but the point here is that goods inflation right now is very tepid. Tariffs risk upsetting this for a period of time, but it’s unclear how broader inflation will react. We suspect the first order is for firms to pass along costs as much as they can... The rally in the front end from the release of the CPI report reflects some relief by the market that inflation didn’t rebound. Yet we note the drivers of inflation haven’t changed: With services inflation continuing to run at 4.5% year over year, it’s unlikely core inflation will reach the Fed’s target anytime soon.”
Ali Jaffery, CIBC Capital Markets:
"Underneath the hood, the picture was not so bad for inflation. If you strip out used cars, then core good prices rose just 0.1% on the month, he says. And services inflation slowed alongside shelter. Even so, there are doubts about the magnitude of 2025 rate cuts. The threat of a pause and a stretched out easing cycle is growing if growth doesn’t slow or aggregate price pressures don’t cool a bit more."
John Brady, RJ O’Brien
“Jan is a skip and they will cut in December, because they have to, as their initial move and dot-plot outlook in September locked them in."
Richard Flynn, Charles Schwab UK
“Several Fed speakers have recently indicated that they are unsatisfied by the rate of improvement in inflation and the regression in November fails to provide reassurance on that front. This may lead policymakers to err on the side of caution, opting for a pause in cutting interest rates to avoid bolstering pressure on prices.”
Michael Brown, Pepperstone
"The figures shouldn’t deter the FOMC from a quarter-point cut next Wednesday. However, risks around the monetary policy outlook are set to become increasingly two-sided in the first quarter of next year. Chiefly, policymakers will be concerned about the potential upside inflation risks stemming from incoming President Trump’s tariff plans, as well as the broader reflationary fiscal stance, whereby strong demand could further fuel price pressures.”
Source: Bloomberg
