By Benjamin Picton, Senior Macro strategist at Rabobank
Relief and Anxiety
Yesterday’s US November CPI inflation report was sufficiently benign to diminish doubts as to whether the Fed would cut rates at next week’s policy meeting. On the back of the as expected report, the Nasdaq dutifully pushed higher. That said, there is some evidence that progress on lowering price pressures may be stalling. The headline CPI inflation rate at 2.7% y/y, was a touch higher than October’s 2.6% y/y while and the core remained at a ‘sticky’ 3.3% y/y. As a result, the market is still concerned as to whether the December 18 FOMC meeting could bring a ‘hawkish cut’. In Rabobank’s view, the Fed is only likely to reduce rates twice more – next week and in January, before its easing cycle is complete. Even market doves are debating whether the Fed will at least have to pause its easing cycle early next year on the back of a resilient US economy and the inflation supportive policies of President-elect Trump.
