U.S. Consumer Prices Rise, Fed Expected to Cut Rates

(Reuters) – U.S. consumer prices increased by the most in seven months in November, but that is unlikely to discourage the Federal Reserve from cutting interest rates for a third time next week against the backdrop of a cooling labor market.

The consumer price index (CPI) rose 0.3% last month, the largest gain since April after advancing 0.2% for four straight months, the Labor Department reported on Wednesday. In the 12 months through November, the CPI climbed 2.7% after increasing 2.6% in October.

Economists polled by Reuters had forecast a 0.3% rise in CPI and an annual advance of 2.7%.

MARKET REACTION:

• STOCKS: U.S. stock index futures extended a slight gain to +0.38%, indicating a firm open on Wall Street.
• BONDS: The 10-year U.S. Treasury yield fell to 4.222%, and the two-year yield fell to 4.124%.
• FOREX: The dollar index pared a gain to +0.02%, and the euro turned +0.1% positive.

COMMENTS:

SEEMA SHAH, Chief Global Strategist, Principal Asset Management (by email)

"Today’s inflation report likely confirms a Fed policy cut next week, but monthly core inflation hitting its strongest rate since early 2024 means price pressures remain concerning."

RICHARD SICHEL, Chief Investment Officer, Philadelphia Trust, Greater Philadelphia

"The CPI number came in as expected. It's clear that reaching 2% inflation is proving to be a long journey."

WASIF LATIF, President and Chief Investment Officer, Sarmaya Partners, Princeton, New Jersey

"The report was right in line with expectations. The equity market is relieved since there were no surprises."

ERIC WINOGRAD, Director of Developed Market Economic Research, AllianceBernstein, New York

"There's some good news as shelter inflation decelerates, which is important. However, services inflation remains a concern."

DAVID MILLER, Chief Investment Officer, Catalyst Funds, New York

"With everything in line with estimates, it’s likely that the Fed will cut 25 basis points later this month."

MARC CHANDLER, Chief Market Strategist, Bannockburn Global Forex, New York

"The CPI matches expectations, surprising given that job growth was slightly above average."

ROBERT PAVLIK, Senior Portfolio Manager, Dakota Wealth, Fairfield, Connecticut

"The report eked in as expected and the market appreciates it for that. But inflation is still sticky."

WHITNEY WATSON, Global Co-Head and Co-CIO, Goldman Sachs Asset Management, New York (by email)

"In-line core inflation clears the way for a rate cut at next week’s FOMC meeting."

BRIAN JACOBSEN, Chief Economist, Annex Wealth Management, Menomonee Falls, Wisconsin

"There's nothing to see here; we are headed for a 25 bps rate cut next week."

JOSH HIRT, Senior U.S. Economist, Vanguard (via email)

"The CPI print confirms the market consensus on another 25bps rate cut."

PETER CARDILLO, Chief Market Economist, Spartan Capital Securities, New York

"The report indicates that while inflation remains sticky, it does not derail the Fed from cutting rates next week."