🇺🇸❗️Cable FX Macro Weekly Note: U.S. December Consumer Prices

**As seen in Risk In The Week report 01/05/24, subscribe at cablefxm.co.uk/reports

U.S. November consumer prices eased to 3.1% Y/y from the prior 3.2%, this was in line with the median forecast. The core metric came in unchanged at 4.0% Y/y mainly supported by core services prices. The figures showed inflation easing to the slowest since June, energy prices negative contributions increased when compared to the prior month and food prices eased. Shelter prices contributed 2.2 percentage points to the headline, this was less than the prior month’s 2.6 percentage points and marked the lowest addition since September 2022. Not everything was good news at the Fed as the closely watched supercore CPI accelerated to 3.9% Y/y from 3.7%, this would give FOMC hawks an excuse to hold ground and push back on rate cut expectations.

The median economist U.S. December CPI expectation is seen at 3.2% Y/y, projections range from 3.1% to 3.4%. The desks at HSBC and Nomura see prices rising by 3.3%, TD expects 3.2%, BNP Paribas pencils 3.4%. The core metric is seen falling to 3.8% Y/y, this will be the first below 4.0% print since May 2021. December estimates compare to the median 2024 forecast, prices are seen slowing to 2.6% this year. Analysts at Goldman Sachs said that a rapid decline in inflation will probably lead to the FOMC cutting interest rates by 25bps in March, May, and June. Goldman’s forecast implies the Fed will deliver five rate cuts in 2024 and three in 2025. Economists at ING noted that the core PCE deflator has shown more signs of progress over the last six months, however, they see the headline softer in December on the back of falling gasoline prices and and easing rents. ING said that the data will likely provide further confidence to the Fed as their 2% price target could be reached by mid-2024.