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

**As seen in Risk In The Week report 01/07/23, subscribe at cablefxm.co.uk/reports

**Analyze economic estimates for this release at cablefxm.co.uk

November inflation figures in the U.S. slowed for another straight month, headline prices fell to 7.1% Y/y vs the consensus of 7.3%. Core inflation came at 6.0% Y/y, the monthly figure expanded at 0.2%, this was the slowest increase in over a year. Contributions from energy, food and commodities declined, services prices were steady at 3.9pp. Commodities which stand for about 39.2% of the index declined on the month, shelter weighted at 32.7% of the basket eased to the lowest in four months at 0.6% M/m. Used cars posted a fifth consecutive month of declines, airline fares went down for a second consecutive month. Broadly speaking, the report pushed up expectations for a slowdown in Fed rate hikes, these materialized with a 50 basis point hike in December. Also, market implied rates were lowered across the curve, the desk at Morgan Stanley pencilled a 25bps hike in February and no further moves, leaving the peak FFR at 4.625%. Another development markets have been watching is inflation expectations, which have recently dropped and could see further downside. Consumer price expectations are sensitive to high frequency items like gasoline, the average national price at the pump fell by 7.6% in December and marked a 6th consecutive month of declines. While inflation indicators remain elevated, the move is certainly in the Fed’s direction. Adding to this, the team at Bloomberg Economics says global inflation peaked in Q3 at 9.8% Y/y, and they see it falling to 5.3% by end of this year. Analysts at CIBC note that supply chains have improved and momentum in the shelter component is likely to halt this year, so this will lead the Fed to start analyzing the cost of tightening in the labor market and demands for services. CIBC expects evidence of a price slowdown and the Fed to deliver another 50bps of rate hikes this year.