NYC Indices Rally Ahead of CPI & Fed Decision
In the coming days, some important indicators regarding the near-term trajectory of the world’s largest economy are set to hit the markets. Ahead of the much-anticipated U.S. Consumer Price Index data release today at 8:30 EST as well as the Federal Open Market Committee’s interest rate decision Wednesday, a mood shift seemed to be underway on the trading floors of New York City.
Wall Street Indices Rally
Over the course of the first day of the trading week, a sense of optimism may have been sensed on Wall Street. By the ring of the closing bell on Monday, December 12th, the Dow Jones Industrial Average (USA 30) had risen by over 500 points, a nearly 1.6% jump to open the week. Index peers the S&P 500 (USA 500) and Nasdaq (US-TECH 100) also got boosts of 1.4% and just under 1.3% respectively.
Financial analysts are pointing out that the proximate causes for yesterday’s good fortune on the Big Apple’s stock markets could be the positive news expected out of the District of Columbia this week. Indices across the globe have been hard-hit by record inflation rates across much of the industrialised world in 2022, but this week’s Consumer Price Index data release and Fed decision may be somewhat more tranquil. (Source:The Wall Street Journal)
Has Inflation Reached Its Peak?
The latest figures for the Consumer Price Index, due to be released today, December 13th, at 8:30 EST, are predicted by many to reveal a slowdown in inflation for the second month in a row. It’s estimated that this report, the last of 2022, will show that consumer prices rose by 0.3% in November when volatile food and energy costs are not taken into account. This would represent the second month in a row that core inflation was limited to a 0.3% rise.
What does this mean for inflation’s outlook over the near-term? Throughout much of the year, many economists repeatedly underestimated consumer price hikes and were unpleasantly surprised by core CPI jumps that were higher than expected. However, October’s figures showed inflation rising more slowly than the predicted 0.5%.
Accordingly, if today’s release turns out to reveal another 0.3% rise, the market narrative holding that inflation in the United States has reached its peak may be strengthened. With the scourge of price jumps having dominated the public conversation on the economy for quite some time, investors and traders alike may experience a resurgence of confidence following such news. Furthermore, a cooling down of inflation could influence the decision-making process at the Federal Reserve.
Markets Await Fed Decision
On Wednesday, December 14th, the Federal Open Market Committee, which determines the course of monetary policy in the United States, is expected to announce its final interest rate decision of the year. In recent months, Federal Reserve Chairman Jerome Powell has led the Fed on a course of rapid tightening characterised by successive interest rate hikes. However, some are saying that Powell could pivot this week due to slowing inflation.
The general consensus seems to be that the exact extent of tomorrow’s interest rate hike is already a foregone conclusion, and will come in at 50 basis points. However, markets could be strongly affected by the tone adopted by Powell during his widely-anticipated post-summit press conference tomorrow. If America’s top monetary policy maker indicates that further large jumps in the federal funds rate are in store, the gains experienced by Wall Street Indices yesterday may not be repeated. If, conversely, the Fed chairman seems more dovish, indicating that inflation’s slowdown may be met with a decrease in the pace of rate hikes, New York traders may further Monday’s share price increases. (Source:Barron’s)
All in all, the coast is not yet clear for the American or global economy, and it is as yet unknown whether optimistic predictions for this week’s CPI release or Fed decision will be borne out. Market actors will have to wait and see.