US Core CPI for December Misses Expectations

Summary

The U.S. unadjusted core CPI for December rose 2.6% year-over-year, which was below the market expectation of 2.7% but flat with the previous month’s reading.USHK News The headline CPI came in at 2.7%, meeting both forecasts and the prior month’s figure.

Impact Analysis

So this basically kills the ‘inflation is sticky’ argument for now. After the big November miss, the market was watching for a rebound, but we didn’t get one. Core CPI came in below consensus at 2.6%, flat with the prior month.USHK News This pushes back on the view that last month’s drop was just a technical blip or due to temporary factors.QQ News

Two consecutive months of soft data gives the Fed all the cover it needs to pivot. It becomes much harder to justify holding rates on inflation fears. This reinforces market expectations for a rate cut, which had already strengthened after the November data.JIN10+ 2 We saw the playbook last month: dollar down, bonds and equities up.JIN10+ 2 This print is just more fuel for that fire. The path of least resistance is lower yields and a weaker dollar. Staying long duration and growth stocks seems like the right move; the ‘higher for longer’ narrative is looking dead.