Home > Dynamic > CPI in December 2023...

CPI in December 2023 exceeded expectations, is the Fed’s “first cut” in March pending?

2024-01-12

370

On the evening of January 11, Beijing time, the U.S. Department of Labor released inflation data for December 2023. The year-on-year increase in U.S. CPI in December 2023 expanded to 3.4% from 3.1% in the previous month, exceeding market expectations of 3.2%.

Affected by this, on January 11, local time, the US stock market ushered in an adjustment at the beginning of the session. However, the statements of some Federal Reserve officials stabilized market sentiment to a certain extent. As of the close, the three major U.S. stock indexes were basically flat.

Barkin, President of the Federal Reserve Bank of Richmond, believes that the U.S. CPI data in December 2023 is generally in line with expectations and is convinced that U.S. inflation is stabilizing, but he will not prejudge that the Federal Reserve will cut interest rates in March. Once the inflation rate is on the path to fall to 2%, it will be open to cutting interest rates.

Looking back at the trend of U.S. CPI throughout 2023, this is not the first time that it has rebounded. In July 2023, the year-on-year increase in U.S. CPI expanded to 3.2% from 3% in the previous month; in August 2023, the year-on-year increase in U.S. CPI further expanded to 3.7%, and remained at this level in September 2023.

Facing the rebound in inflation, the Federal Reserve has not followed suit in raising interest rates. After announcing a 25 basis point interest rate hike in July 2023 and raising the federal funds rate target range to between 5.25% and 5.5%, the Federal Reserve "kept on hold" for three consecutive times until the end of 2023.

From a longer-term perspective, the overall downward trend in U.S. inflation in 2024 is the consensus of almost all market institutions.

Ping An Securities believes that U.S. inflation is expected to stabilize in 2024, with PCE (Personal Consumption Expenditures Price Index) and core PCE expected to be around 2.3% and 2.4% respectively at the end of the year. As for the Federal Reserve, it may conduct a "precautionary rate cut", that is, cutting interest rates before inflation falls back to 2% to avoid excessive tightening. In terms of timing, the first interest rate cut may be in the second quarter, and it is expected that the interest rate will be cut three times (75 BP) throughout the year.

In the view of Guotai Junan (Hong Kong), how to decide between "shrinking the balance sheet" and "cutting interest rates" will be the next test faced by the Federal Reserve. Judging from the information that is constantly released, slowing down the "balance sheet reduction" seems to be one of the biggest highlights of the first interest rate meeting in 2024. If this timetable is clear, then the discussion on interest rate cuts can be more focused and systematic.

The above information is provided by special analysts and is for reference only. CM Trade does not guarantee the accuracy, timeliness and completeness of the information content, so you should not place too much reliance on the information provided. CM Trade is not a company that provides financial advice, and only provides services of the nature of execution of orders. Readers are advised to seek relevant investment advice on their own. Please see our full disclaimer.

CM Trade

As a world leading financial trading platform, CMtrade Provides comprehensive one-stop trading services and opportunities for traders.

[Products]

The platform provides over 32 kinds of popular financial products such as forex, precious metals, crude oil, indices, cryptocurrencies and more.

[System]

2 top trading systems CM Trade MT4 / CM Trade APP, powerful and easy to operate

[Service]

Comprehensive market news, professional market analysis, 7*24 hours online customer service

[Advantage]

Low cost, high leverage, flexible one-stop all day two-way trading.

[Authority]

Licensed and strictly regulated by authorities. Traders deposits are independently kept by the bank. Fast deposit and withdrawal. Fair, efficient and transparent trading environment.

Free Access
Daily Trading Strategy Download Now

CM Trade Mobile Application

Economics Calendar

CPI in December 2023 exceeded expectations, is the Fed’s “first cut” in March pending?

Access to global trading markets anytime and anywhere