How will the path of interest rate cuts in the United States proceed? The key lies in this week's CPI
Currently, Wall Street economists predict that the overall CPI in November will rise by 2.7% year-on-year, higher than October's 2.6%. As of last Friday, the market expects an approximately 85% chance that the Federal Reserve will cut interest rates by 25 basis points on December 18
This week, several key inflation data from the United States will be released, particularly the CPI on Wednesday and the PPI on Thursday, which will be crucial factors influencing the December interest rate decision.
Rick Rieder, Chief Investment Officer of Global Fixed Income at BlackRock, stated:
"The Federal Reserve should be able to proceed with a rate cut in December, but next week's CPI report now becomes another important milestone in the policy adjustment calculation."
Market expectations for a rate cut by the Federal Reserve continue to heat up. According to the CME FedWatch tool, as of last Friday, the market estimated an approximately 85% chance that the Federal Reserve would cut rates by 25 basis points on December 18.
Currently, Wall Street economists predict that the overall inflation rate in November will rise by 2.7% year-on-year, up from 2.6% in October. Additionally, the core CPI, excluding food and energy prices, is expected to increase by 3.3% year-on-year, maintaining this level for the fourth consecutive month.
However, the path for inflation to return to the Federal Reserve's 2% target seems increasingly difficult. The economic team at Wells Fargo, led by Jay Bryson, stated that the persistence of inflation makes this target hard to achieve, especially in light of new adverse factors such as tariffs and expectations of tax cuts. The CPI report for November is not expected to change this situation.
Scott Chronert, U.S. Equity Strategist at Citigroup, pointed out that the December Federal Reserve meeting appears to be the last obstacle to the rise of U.S. stocks before the end of the year. If the inflation data for November falls short of expectations, it could trigger market concerns about Federal Reserve policy, especially given Chairman Powell's hawkish stance.
John Koudounis, CEO of Calamos Investments, also emphasized that the performance of the inflation data will be the focus of market attention.
"If the data significantly deviates from expectations, it will undoubtedly attract widespread attention from the market."