Traders are currently widely betting that the Federal Reserve will not significantly ease monetary policy in 2025. Against the backdrop of a robust economy and labor market, policymakers need to see new progress in slowing inflation in order to continue cutting interest rates. However, at the moment, such progress is uncertain.
The US Bureau of Labor Statistics will release the PPI data for December 2024 at 21:30 tonight. Economists generally expect the PPI to rise 0.3% month-on-month, lower than the 0.4% in November. But the year-on-year data is expected to rise from 3.0% in November to 3.4% in December. The core PPI excluding food and energy is expected to rise 0.3% month-on-month in December, with the year-on-year increase expected to accelerate from 3.4% in November to 3.8%.
The PPI measures changes in the prices of goods and services at the wholesale level in the US, including price fluctuations from raw materials to finished products. The PPI is usually a leading indicator of the CPI, as producers often pass on cost increases to consumers.
The strong performance of the December non-farm employment report, which far exceeded market expectations, has triggered negative reactions in the stock and bond markets. While the US economy continues to perform strongly, it is also accompanied by inflation levels that exceed the target, and market expectations for the Federal Reserve to cut interest rates this year have declined significantly.
In addition, the US Bureau of Labor Statistics will release the more heavyweight CPI data at 21:30 Beijing time on Wednesday, which is expected to show that the slowdown in inflation remains weak. Currently, the interest rate futures market expects the probability of the Federal Reserve cutting interest rates at the January meeting to be less than 3%, and believes that there may only be one small rate cut (25 basis points) by the end of 2025.
