Meanwhile, core inflation continues to decline, but remains above expectations.
Consumer price index (CPI)Consumer price indexConsumer price indexBoth CPI inflation and PCE inflation measure price changes for consumers. However, PCE inflation is broader and takes into account price changes across the economy's output, as well as changes in costs borne by consumers.) in the United States of America by 3.4 percent in December, compared to the same month last year, according to new figures from US Bureau of Economic Analysis.
In advance, economists were expecting a slight rise to 3.2 percent, according to a Bloomberg survey. In November, the CPI inflation rate was 3.1 percent.
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Core inflation is still too strong to meet two percent over time, Handelsbanken chief economist Marius Gunsholt Hof tells E24.
It is reported that there will be two more inflation numbers before the interest rate meeting in March, but the market is starting to reduce expectations of cuts.
-The market should calm down a bit regarding interest rate cuts in March.
Food and energy prices continued to rise during December. There was also a development in the prices of housing, vehicle insurance, and medical services.
Core inflation ignores energy and food prices. It closed at 3.9 percent in December.
In advance, a decline of 3.8 percent was expected, from 4 percent in November.
The central bank, the Federal Reserve (Fed), is particularly concerned with this goal when it sets interest rates.
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US interest rates have remained unchanged in the 5.25-5.50 percent range since July, the highest level in 22 years.
At its December rate meeting, the Fed signaled three rate cuts in 2024. This contributed to significant market optimism in the days leading up to Christmas with high expectations for rate cuts already in March.
“Although the Fed is now in a phase in which it would prefer to adjust interest rates downward, the Fed signals indicate that it does not envisage any imminent rate cuts,” Handelsbanken wrote in his morning report today.
Since the last interest rate meeting, market confidence in impending interest rate cuts has declined somewhat.
Before US inflation figures became available Thursday afternoon, the market had forecast a roughly 67% chance of a rate cut in March.
Shortly thereafter, the market believes the probability is closer to 62 percent, according to the tool CME FedWatch tool.
However, the next interest rate meeting in the US will be on January 31. Hence there is widespread expectation that the Fed will keep interest rates at the current level.
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