As the Federal Reserve's December 18 meeting approaches, market expectations for its policy direction are rising. The CPI and PPI data to be released this week will be key variables affecting this interest rate decision. CPI data not only determines short-term market sentiment, but also provides clues for the future path of rate cuts.
CPI data: a key guide to inflation trends
According to the latest forecast, the overall CPI year-on-year growth rate in November is expected to be 2.7%, higher than 2.6% in October; the core CPI year-on-year growth rate is expected to remain at 3.3% for the fourth consecutive month. These data indicate that although inflation is slowing, it is still some distance from the Federal Reserve's 2% target.
Wall Street economists' expectations for CPI sub-item data are as follows:
- Used car prices: expected to rise 2.0% month-on-month, continuing to maintain strong growth.
- Energy prices: expected to rise 0.3% month-on-month, providing some support for overall inflation.
- Housing costs: expected to slow, with owner's equivalent rent rising 0.33% month-on-month, lower than 0.40% in October.
The complexity of the Federal Reserve's rate cut path
Currently, the market generally expects the Federal Reserve to cut rates by 25 basis points in December, and according to the CME FedWatch tool, the probability of this is as high as 85%. However, the stubbornness of inflation and new adverse factors (such as tariff adjustments) may constrain the Federal Reserve's easing policy.
Citigroup strategist Scott Chronert believes that if this week's CPI data is lower than market expectations, it may exacerbate investors' concerns about the uncertainty of the Federal Reserve's policy, especially against the backdrop of Chairman Powell's hawkish stance. At the same time, the Wells Fargo economics team pointed out that the path of inflation returning to the 2% target may be longer than expected.
Policy outlook after rate cuts
Even if a rate cut is achieved in December, the future easing path is still full of uncertainties. BlackRock Global Fixed Income Chief Investment Officer Rick Rieder said: "The Federal Reserve should be able to implement the rate cut in December, but the CPI report has become an important milestone in policy adjustments."
In addition, Calamos Investments CEO John Koudounis pointed out that the market has already seen the CPI as a key factor in determining the direction of the year-end stock market. If the data falls short of expectations, it may trigger more concerns about future policies.
The subtle interplay between the market and policy
Currently, US stocks are performing strongly, with the S&P 500 and Nasdaq Composite indices hitting new record highs, and the Dow Jones Industrial Average also breaking through 45,000 points. However, economists warn that the market's optimistic expectations may underestimate potential policy risks. The complexity of inflation and the possibility of the Federal Reserve's "hawkish rate cuts" add more uncertainty to the future market.
Summary
This week's CPI data will be a touchstone for the Federal Reserve's policy path. Can a moderate rate cut progress as smoothly as the market expects? Will inflation accelerate unexpectedly? These questions will be answered in the coming days, and the Federal Reserve's policy decisions will be under the spotlight of the global market.
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The above content is from public market information and is for reference only, and does not constitute any investment advice. The cryptocurrency market is high-risk, and investment requires caution.
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