According to the December CPI Report, some goods and services are still rising in price while others have decreased more than anticipated.
The release today was sufficient to satisfy the investors.
The S&P 500 and Nasdaq Composite indexes were trading 1.8% and 2.3% higher, respectively, at 2 pm ET Wednesday. This mid-week rally has helped reduce losses that were suffered earlier in this week. The Nasdaq Composite is now flat for the past five trading days while the S&P 500 has edged into the green, now up 0.5% over that time.
The price increase was 0.4% for the month, and 2.9% in the past year. These figures were close to what analysts had predicted, which was 0.3%. In the 12-month period ended December, Core CPI (which excludes energy and food prices) slowed from 3.3% to 3.2%, slightly less than analysts expected.
It had little effect on expectations for interest rates, as fed funds futures market still predicted that committee members would hold the rate steady at 97% probability later this month.
Investors were still thrilled with the December reading, which showed that central bank had made progress towards bringing inflation down to 2%.
Rate cuts are likely to continue in 2025, although they may not be as many.
“The key question now is whether the FOMC’s ‘skip’ turns into a more prolonged ‘pause’,” Michael Brown, Senior Research Strategist at Pepperstone. “Risks around the policy outlook this year are considerably more two-sided than those seen last year, with a renewed hawkish risk re-introduced to the policy path.”
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