"New Federal Reserve News Agency": The challenge from Trump and the Federal Reserve has arrived, CPI shows inflation strengthening

The U.S. November CPI growth announced this Wednesday met Wall Street expectations, with both the overall CPI and the core CPI, which economists believe better reflects inflation, showing month-on-month and year-on-year growth rates consistent with analyst forecasts. Notably, the core CPI recorded a month-on-month growth of 0.3% for four consecutive months, indicating signs of stabilization in U.S. inflation.

Shortly after the CPI announcement, Nick Timiraos, a senior reporter known as the "new Federal Reserve correspondent," warned in an article he co-authored that the CPI indicates strengthening inflation. The article was directly titled "Strengthening Inflation Poses Challenges for Trump and the Federal Reserve." It began with:

"In November, progress in reducing inflation has stalled, with the consumer price index (CPI) for goods and services (year-on-year) increasing by 2.7%."

The article argues that the 2.7% CPI growth indicates that "the road to reducing inflationary pressures remains bumpy."

It states that the month-on-month growth rate of consumer goods prices, excluding food and energy, is at its fastest level in a year and a half, with significant increases in automobile prices, partly due to replacement demand following recent hurricanes. The article notes that the current CPI growth is noteworthy because "as of August, the prices of many goods had been declining or flat for about a year, and this trend seems to have reversed."

Therefore, the article believes that this new inflation situation presents "a profound core challenge" for the incoming President Trump, who has pledged to curb high inflation.

Not long after the U.S. election, Bloomberg macroeconomic strategist Simon White pointed out in an analysis that Trump's election is not a necessary factor for triggering U.S. inflation, but it will indeed fuel inflation. Currently, price growth has stabilized, but the legendary "last mile" to reducing inflation has turned into a marathon. Robust economic growth, strong corporate profit margins, China's increasing stimulus measures, and the nearly $2 trillion U.S. fiscal deficit have already pushed inflation onto a recovery path. If Trump implements policies such as increased tariffs, tax cuts, and increased spending, inflation risks will further escalate.

Wall Street Journal has previously mentioned that, given the plans proposed during Trump's campaign, the market expects the Trump administration to impose tariffs externally, conduct large-scale deportations of illegal immigrants internally, and exacerbate fiscal deficits through tax cuts, all of which are seen as measures that could drive up inflation. Therefore, after Trump's victory, the possibility that the Federal Reserve may slow down interest rate cuts due to inflation risks has become a hot topic of discussion.

This Wednesday's article co-authored by Timiraos also mentioned the challenges the Federal Reserve faces in this regard. The article stated:

“The CPI report also raises questions about the pace of interest rate cuts by the Federal Reserve over the next year.”

However, Wednesday's CPI data is seen as strengthening the case for the Federal Reserve to continue cutting rates next week. The market widely expects that the Federal Open Market Committee (FOMC) meeting next week will decide to cut rates by 25 basis points for the second consecutive time, marking the third rate cut in a row since September.

Whitney Watson, Co-Head of Global Fixed Income at Goldman Sachs Asset Management and Co-Chief Investment Officer, commented that the core CPI released on Wednesday met expectations, paving the way for a rate cut next week. According to Wednesday's data, the Federal Reserve is still confident in the downward trajectory of inflation, and Goldman Sachs expects the Federal Reserve to further gradually ease monetary policy in the new year