This is December's U.S. Inflation Expectations Markets Need to Know Ahead of Real Data!


 US inflation is expected to pick up slightly in December, while the underlying annual reading is expected to slow. At the same time, Federal Reserve policymakers are looking for signs of a slowdown in price growth before implementing possible interest rate cuts this year.

Economists expect the annual consumer price index (CPI) rate from the world's largest economy to rise to 3.2% last month, up from 3.1% in November. On a monthly basis, this rate is expected to increase to 0.2%.

Waima said the "core" reading rate, which excludes volatile items such as food and energy, is expected to fall to 3.8% on an annual basis, down from 4.0% in the previous month. On a monthly basis, core CPI is expected to match November's figure of 0.3%.

The Fed's policymakers will likely be watching this data closely, as it could impact how they handle further interest rate cuts in 2024. In a speech on Wednesday, New York Fed President John Williams argued that it was too early to expect a reduction as inflation is still well above the 2% target set by the bank.

Williams' comments echo recent sentiments from other rate-setters, who are trying to curb heightened market enthusiasm for possible tapering earlier this year. This optimism, fueled by the Fed's surprising outlook last month, fueled a rally in stocks in the final week of 2023.

The Fed has raised interest rates to the highest level in more than two decades, from 5.25% to 5.50%, in an effort to curb inflation that has risen rapidly since the pandemic. Price increases have largely moderated in the last six months of 2023, although it is uncertain whether the central bank will succeed in bringing inflation down to 2% without triggering a crisis in the wider economy.

US stock futures were generally higher on Thursday, with traders gearing up for the publication of inflation data at 9.30 p.m.