US Fed rate cuts may wait as inflation ticked up in December
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US central bankers want more confirmation that inflation is on a firm path towards their 2 per cent goal before they reduce the policy rate.
PHOTO: REUTERS
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NEW YORK - Federal Reserve policymakers may not be quite as eager to start cutting interest rates as soon as March after fresh data showed inflation ticked up
The consumer price index rose 0.3 per cent in December after increasing 0.1 per cent in November, the Labour Department’s Bureau of Labour Statistics said on Dec 11.
From a year earlier, consumer prices rose 3.4 per cent, more than the 3.2 per cent economists polled by Reuters had expected.
US central bankers want more confirmation that inflation is on a firm path towards their 2 per cent goal before they reduce the policy rate, now in the 5.25 per cent to 5.5 per cent range.
Jan 11’s data fell short of delivering that, with shelter prices failing to cool as policymakers have long expected.
Used car prices, air fares and medical care services prices also rose.
“The upshot of today’s inflation report is that the inflation dragon, while maimed, has yet to be slain,” said Mr Jason Pride, chief of investment strategy and research at Glenmede.
Futures contracts that settle to the Fed’s policy rate are still pricing in about a 65 per cent chance of a Fed rate cut in March, down from about a 70 per cent chance seen before the report, and see the Fed taking the policy rate down below 4 per cent by the end of 2024.
Those bets are far more aggressive than Fed policymakers themselves signalled
