US CPI preview: what does it mean for Fed rate cuts?
The upcoming US inflation report could determine whether the Federal Reserve begins cutting rates in December, with markets keenly watching for signs of continued disinflation.
What to expect from the US CPI report
Economists forecast core inflation, which excludes food and energy prices, to remain steady at 3.3% year-over-year (YoY) for November.
The monthly core consumer price index (CPI) reading is expected to show a 0.3% increase, a level consistent with the Federal Reserve's (Fed) disinflationary narrative.
Headline inflation is predicted to demonstrate further moderation, supported by easing energy prices and broader price pressures.
Market participants using forex trading platforms are closely monitoring this release for its potential impact on US dollar movements.
Key components under scrutiny
Shelter costs remain a critical focus, as housing-related expenses have been a significant driver of core inflation throughout 2023.
Services inflation persistence continues to concern policymakers, with wage pressures potentially keeping prices elevated in this sector.
Energy prices, though excluded from core calculations, will influence headline inflation and consumer sentiment.
These components will be crucial for traders using spread betting and CFD trading to position themselves.
Market implications of the CPI data
An inflation print in line with or below expectations could cement market expectations for a December rate cut, potentially weakening the dollar.
Trading platforms are likely to see increased activity as investors react to the data across multiple asset classes.
Bond markets will be particularly sensitive to any surprise in the core inflation reading, affecting yields across the curve.
Equity markets could rally if the data supports the narrative of controlled inflation and potential monetary easing.
Impact on Federal Reserve policy
Markets currently price an 85% probability of a quarter-point rate cut in December, highlighting the importance of this inflation report.
Traders engaging in online trading should consider how the data might influence the Fed's forward guidance.
A higher-than-expected reading could challenge the market's dovish expectations and potentially delay rate cuts into 2024.
The Fed's reaction to this data will be crucial for trading signals and market direction.
How to trade the US CPI release
- Research market reactions to previous CPI releases using our trading for beginners guides
- Choose whether you want to trade or invest
- Open an account with us to access US markets
- Consider practicing your strategy with a demo account
- Monitor the CPI release and place your trades accordingly
Looking ahead to 2024
Markets anticipate up to three additional rate cuts in 2024 if inflation continues its downward trajectory.
Economic indicators between CPI releases will remain crucial for shaping policy expectations.
The Fed's response to evolving inflation data will guide market sentiment throughout the year.
Traders should maintain flexibility in their strategies as the inflation narrative continues to develop.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
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