November’s US inflation print has all but confirmed a 25 basis point interest rate cut at the Federal Reserve’s next meeting in seven days time, according to industry commentators.
Inflation came in at 2.7%, in line with analyst expectations, up from 2.6% in October. The data marks the second monthly increase in a row.
“Although slightly warmer, this inflation print is unlikely to derail the Fed’s rate cutting cycle and we continue to expect the Fed to cut rates by 25 basis points at their final 2024 later this next month,” said Nathaniel Casey, investment strategist at Evelyn Partners.
“However, we remain vigilant of any further deviations in the inflation trajectory, given the resilience of the US economy and the potentially expansive fiscal policy that could accompany the Trump Presidency in January.”
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Core inflation, which excludes foods and energy, held steady at 3.3%.
“As markets came into today’s figure with fears of an upside surprise, the in-line number is being received very positively,” Seema Shah, chief global strategist at Principal Asset Management, said. “And, certainly, there is some good news here – owner equivalent rent has fallen to the slowest pace since January 2021.
“But overall, the Fed will be concerned by the very stubborn nature of inflation and will be increasingly cautious about the upside inflation risks that President-Elect Trump’s policies may bring. We expect the Fed to move off autopilot in January, adopting a more cautious tone, and slowing its pace of cuts to just every other meeting.”
Quintet Private Bank CIO Daniele Antonucci also expects the Fed to deliver its third 25bps cut in a row next week.
“The monetary policy outlook for next year, though, is less clear,” he added. “On balance, the central bank should probably have room to lower rates further, as inflation continues to normalise in the near term.
“But the pace of cuts, and the timing, is uncertain and, in any case, we don’t expect a return to the ultra-low rates of the past decade. Rather, it’s plausible that the Fed might consider that slowing its policy easing as soon as next quarter.”
