November US CPI uptick not a Fed incentive for early ease

STOCKS: U.S. stock index futures easing slightly and were last off 0.08%

BONDS: U.S. Treasury yields dipped right after the data reversed, with 2-year note last at 4.741%, and the 10-year note at 4.233%FOREX: The dollar index pared a loss and was off 0.08%

COMMENTS:

STUART COLE, HEAD MACRO ECONOMIST, EQUITI CAPITAL, LONDON
"U.S. CPI numbers a little hotter than expected for November, with both the headline and core monthly rates posting 0.1% gains on last month’s reading. The numbers very much underline the somewhat bumpy road CPI is going to take to get back to target, the numbers very much reinforcing what we have already heard from various officials, namely that the last 2% reduction in CPI to target was going to be the hardest."

"Although the Fed has probably done enough tightening in this cycle, these figures, and particularly when viewed in light of last week’s employment report, very much lay the ground for this week’s FOMC meeting to deliver the now familiar message that a further rate rise remains on the table should it be needed."

"For Powell, a core CPI rate of 4% remains too high and in that respect today’s figures do not present anything that is necessarily a cause for celebration. The FOMC will want to be certain that pricing pressures are on a sustainable downwards path before contemplating any relaxation in policy and will likely be keen tomorrow to push back against growing market expectations of a near term policy easing."
"The market will read into the report what it wants to read and its reaction so far suggests that overall it is being seen as a dovish set of figures. But if you discount the natural tendency for markets to over-react, on balance the latest employment and inflation numbers probably point to a first cut coming in Q2 rather than Q1."

CHRIS ZACCARELLI, CHIEF INVESTMENT OFFICER, INDEPENDENT ADVISOR ALLIANCE, CHARLOTTE, NC
“The data this morning was unsurprising and even though tomorrow’s Fed rate decision was never in doubt, there is nothing in this report that should stop the Fed from staying on hold well into next year and potentially beginning rate cuts in the second half of 2024. . . . To the extent that the market is expecting rate cuts in order to rally, those investors may be disappointed for some time to come, but we don’t believe the market is rallying in anticipation of cuts; we believe the market is rallying because the economy is expanding at a rapid pace, unemployment is low, consumer spending is high, and the Fed is on hold.”

ART HOGAN, CHIEF MARKET STRATEGIST, B RILEY WEALTH, BOSTON​

"The very much anticipated CPI report came out largely in line with expectations. So what's the most important to us is what's the most important to the Fed. The CPI is very much in line with expectations."

"I don't think that changes anything that happens tomorrow at the FOMC meeting, and I certainly think this is something that the markets should be fine with today."

BRIAN JACOBSEN, CHIEF ECONOMIST, ANNEX WEALTH MANAGEMENT, MENOMONEE FALLS, WISCONSIN“Inflation is coasting towards the Fed’s target, but not fast enough for the Fed to talk about rate cuts. Powell will probably say that the job isn’t done yet, but we’re at least closer to the end than we are to the beginning.”

PETER CARDILLO, CHIEF MARKET ECONOMIST, SPARTAN CAPITAL SECURITIES, NEW YORK

“The numbers are going in the right direction. Today’s inflation data is not likely to change the Fed expectations of a rate hold this month or the fact that they’re likely raising rates.”

“I’m expecting a dovish dot plot, but the statement will be consistent; the fight against inflation has not been won and the Fed will continue to move as necessary.”

“It doesn’t change the fact that the market is pricing in a rate cut by June. But if these numbers continue to come down this gradually, the market could be wrong and the first interest rate cut will come later. I think it will come in the third quarter.”

“Yes, inflation remains elevated. It’s coming down at a snail’s pace, but it’s heading in the right direction.”