US CPI: Inflation for December Rises to 2.9%, Meeting Estimates. What It Means for the Fed.

Consumer prices rose according to Wall Street expectations and complicated the Federal Reserve’s rate-cutting actions.

🏷️ Inflation Lands Right

• US inflation for December rose 2.9% on an annualized basis, according to the consumer price index USCPI data released Wednesday morning. The monthly growth clip came in at 0.4%, slightly topping estimates of 0.3%. Core CPI rose 3.2% year-over-year and 0.2% month-on-month.
• It was a mixed-bag report. On the one hand, the readout wasn’t a big surprise to traders. But on the other hand, December marks yet another month of growing price pressures after November’s inflation landed at 2.7%.

🤓 What to Make of the Data?

• Now markets are about to calibrate their expectations on the interest-rate front. More precisely, what does this report mean to the Federal Reserve and will officials still be in favor of the highly anticipated interest rate cuts? Previously, Fed chief Jay Powell had signalled two cuts in 2025.
• But the US central bank is data dependent, meaning it may or may not stick to its guidance. If policymakers decide that this was it, they may push back on expectations of further cuts to borrowing costs.

💵 Dollar Moves Lower

• Apparently, the inflation trajectory is bumpy. But how is this affecting markets left and right? The US dollar initially sold off as forex traders digested the news. The EUR/USD advanced to levels above $1.0350 but then pared back some of the gains to $1.0330, floating fairly flat on the day. Gold rose to levels above $2,690 per ounce, ticking higher on the day.
• Stock futures were showing highly upbeat figures. Futures contracts tied to the S&P 500 were higher by 1.1%. Futures on the Nasdaq were doing even better, up 1.3%. Dow futures were up 1% ahead of the opening bell in New York.