Final 2024 CPI Release: Is US Inflation Rising Again?

Today, Wednesday, 11 December, the Consumer Price Index (CPI), a key indicator for the health of the world’s largest economy, is due for an update. Many experts are predicting results that could come as surprising to traders when November’s CPI data hits the airwaves, so let’s take a closer look:

Deja Vu for the American Consumer

The November CPI report, due Wednesday, 11 December, at 13:30 GMT, is expected to show an annual inflation rate of 2.7%, marginally higher than the previous month's reading of 2.6%. If this data prediction is borne out, it would mark the steepest increase in this key economic indicator since the summer and casts doubt on the Federal Reserve's continuing quest to bring inflation closer to the 'ideal' 2% range. Furthermore, core CPI, excluding volatile food and energy prices, is projected to remain steady at a higher level of 3.3%.

These data points indicate that analysts are anticipating monthly gains of 0.3% in both headline and core CPI, with rising goods prices playing a significant role, partially offset by easing home price inflation. Despite some relief in housing costs, energy prices, along with categories like cars and plane tickets, are expected to have contributed to inflationary pressures.

This CPI report can be presumed to be a key factor at the Federal Open Market Committee's next summit, set to conclude with a press conference on 18 December. While markets seem to be pricing in a 25 basis point or 0.25% interest rate cut as of Wednesday morning, an unexpectedly high CPI reading could push the United States' top monetary policymakers to hold off. 

The aforementioned predictions contrast with recent remarks from Federal Reserve Chair Jerome Powell, who took care to highlight the American economy's resilience in outperforming forecasts. This strength could provide room for a cautious approach to rate adjustments, though inflation's stubbornness makes next week's decision more opaque. (Source: CNCB)

Traders Tensing Up?

As inflation’s path remains uneven, Wednesday’s release is poised to shape the Fed's next moves, with potential market implications, particularly for the US Dollar and broader financial markets. Should key bottom-line figures come in as expected or even overshoot the predicted range, the greenback could get a boost while equities may droop.

As of the time of writing, the US Dollar Index (DX) has been trading steadily in the $106 range since early November. A surprise CPI outcome might push this measure of the greenback’s strength back upward, while conversely, a reading in line with expectations could see the index easing downwards, closer to $105. With regard to forex, the key EUR/USD currency pair could be pulled downward by a higher inflation reading that leads to risk aversion and a rush toward the dollar.  

Globally, Asian indices have been subdued, reflecting investor caution ahead of these data. The Nikkei (Japan 225) rose by a scant 0.01%, while Hong Kong's Hang Seng Index (Hong Kong 50) saw a 0.77% loss in value. Meanwhile, commodities like oil (CL) and gold (XAU) are finding support from broader macroeconomic factors, including China's policy shifts, leaving how today’s CPI release could impact them an open question. (Source: Reuters)

Conclusion

11 December's CPI reading, as well as the coming week's Fed rate decision, could not only affect trading trends but also influence how central banks abroad, like the European Central Bank, move. The report’s outcome could even set the tone for the markets overall as we enter the final weeks of 2024. For the moment, investors and market watchers alike will have to wait for the figures' release, as well as to see how these interlocking causes and effects play out on trading floors around the globe.

Past performance and projections do not guarantee future results.