**As seen in Risk In The Week report 12/08/23, subscribe at cablefxmc.co.uk/reports
U.S. October consumer prices showed a downtick in reverse of the prior month's upside price pressures. The headline CPI metric eased to 3.2% Y/y from the prior 3.7%, this was below the consensus median of 3.3%. The core figure printed at 4.0% Y/y to miss the survey of 4.1%. On a monthly basis, consumer prices were unchanged, this was the slowest pace since March. Food prices were also unchanged in October, while energy's negative contribution increased to the highest since May. The positive contribution from core services eased to the lowest since June.
Looking ahead, the team at Bloomberg Economics pencils December prices rising by 3.2% Y/y, this is slightly higher than the market consensus. An aggregate of inflation swap trades compiled by Bloomberg shows that the market implies the December print to rise by 3.3%, the figure is the highest in the forecast range. Bloomberg Economics' model projects U.S. inflation slowing to 3.0% by March and to 2.6% by December 2024. Contrasting the economists' projections, recent data from UoM showed consumer year-ahead inflation expectations slumping to 3.1% from 4.5% in November, this is the lowest survey since March 2021.
The desk at MUFG noted that the market has already started to price in earlier and deeper rate cuts from the Fed, they added these expectations now need to be met by slower consumer prices and softening demand. MUFG flagged risks as the dollar and yields could be ready for a relief rally if data tops estimates. Economists at Wells Fargo project a moderate deceleration in the U.S. economy during 1H 2024, they expect this to lead to cooling inflation and potential monetary policy-easing. Wells Fargo economists pencil U.S. output slowing to 0.7% in 2024 from their 2.2% projections for this year, they expect consumer prices to ease to 2.5% by December 2024.
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