Breaking: U.S. CPI Rises 0.3% in December, In Line With Market Expectations

The U.S. Bureau of Labor Statistics on Thursday released the Consumer Price Index (CPI) data for December 2023 showing that U.S. CPI  rose 0.3% in the month. The all-items index rose to 3.4% annually as compared with a 3.1% rise in November.

U.S. CPI advances in December

The all-items index rose 3.4% for the 12 months ending December, a larger increase than the 3.1% increase for the 12 months ending November. The all items less food and energy index rose 3.9% over the last 12 months, after rising 4.0% in November.

Market on average was expecting core CPI to remain unchanged at 0.3% from the month before, while year-on-year inflation was expected to slow to 3.8% from November’s 4%, a Reuters poll showed.

Financial sectors across the globe, including the crypto markets had a volatile session this week amid the much-anticipated Bitcoin ETF approval. However, today’s CPI data will provide important cues to understand the Federal Reserve’s upcoming interest rate decision.

Since the beginning of the year, investors have been placing bets on how quickly and steeply the Fed and other institutions will cut interest rates. Fed futures pricing shows that traders are expecting an easing of 140 basis points (bps) this year, as opposed to the 160 bps reduction that was anticipated by the end of 2023.

Still, it is higher compared to the Fed’s projection of 75 bps of cuts in the year. According to the CME FedWatch tool, markets are pricing in a 69% chance of a rate cut as soon as in March.

Meanwhile, Federal Reserve Bank of New York President John Williams said on Wednesday it was too soon to call for rate cuts as the central bank still had some distance to go on getting inflation back to its 2% target, according to a report by Reuters.

Today’s cooler-than-expected data will likely give the Fed more reason to cut rates this year.

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