US CPI inflation softens to 3.1% as forecast

November CPI numbers were in line with expectations, which means rates will remain essentially unchanged until mid to late next year.

CPI y/y +% versus 3.1% expected
Prior y/y 3.2%
CPI m/m +0.1% versus 0.0% expected
Prior m/m 0.0%

Markets whipsawed in the wake of the print, with Treasury yields initially falling across the curve before reversing higher. The US 2-year yield is now up 2.3 basis points, though market expectations for rate cuts in 2024 are little changed. S&P 500 futures fell.

Core measures:
Core CPI m/m +0.3% versus +0.3% expected. Last month 0.2%
Core CPI y/y 4.0% versus 4.0% expected. Last month was 4.0%
Shelter +0.4% versus +0.3% last month. Up 6.5% y/y
Services less rent of shelter +0.6% m/m vs +0.3% prior (+3.5% y/y)
Core services ex housing +0.44% m/m
Real weekly earnings +0.5% vs -0.1% prior
Food +0.2% m/m vs +0.3% m/m prior
Food +2.9% y/y
Energy -2.3% m/m vs -2.5% m/m prior
Energy -5.4% y/y
Rents +0.5% m/m vs +0.5% prior
Owner equivalent rent +0.5% vs +0.4% prior

Now we're pricing in 120 bps in cuts next year versus 115 bps before the report. The market isn't too worried about that 0.1 pp miss on the headline.

Shelter (+6.0% y/y) and motor vehicle insurance (+19.2%) are the only real sources of worrisome upward pressure in prices left.

What does the Fed do now?

$S&P 500 Index (.SPX.US)$ $Nasdaq Composite Index (.IXIC.US)$ $Dow Jones Industrial Average (.DJI.US)$ $SPDR S&P 500 ETF (SPY.US)$ $Invesco QQQ Trust (QQQ.US)$

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efficentupup

True and timely

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