11 December 2024
If you are covering the latest US CPI figures, please see the following comment from Lindsay James, investment strategist at Quilter Investors:
“Headline US inflation has come in at 2.7% today, up from 2.6% last month, while core CPI remained stagnant at 3.3% year on year. However, the month on month core CPI rate came in at 0.3% for the fourth consecutive month. On an annualised basis, this leaves core CPI at 3.6%, notably higher than the current annual rate.
“Inflation has been coming steadily back into focus in the US. This is due in part to the lack of progress that has been made over the last three months, but also because of concerns that higher US government spending plus the introduction of Trump’s tariffs could create a more inflationary backdrop.
“40% of the monthly uptick in inflation came from housing related costs. The Federal Reserve has limited ability to address issues in the housing market, such as the lack of supply and rising development costs. Migrant labour is common on building sites, and the threat of workplace raids under the incoming Trump administration could further increase costs in the industry.
“However, the Fed has a dual mandate of maximum employment and stable prices. Unemployment has been slowly creeping up, now sitting at 4.2% despite the relatively good payroll figures for November. This higher unemployment rate seems likely to dominate the fear of higher inflation at the Fed’s monetary policy meeting next week, and recent comments from several voting members also seem suggestive of a cut.
“This could be the last interest rate cut we see from the Fed for a while, however, as a pause is looking increasingly likely in the new year. The market only expects two or three further cuts over the course of 2025 – although this is a figure that could rapidly change if rising inflation once again takes root.”
