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US Consumer Prices Likely to Show Soft Inflation in December Report

5 months ago

In the upcoming monthly report on US consumer prices, expected today, analysts anticipate another soft inflation reading, attributed in part to ongoing declines in the goods sector. The core consumer price index (CPI), excluding food and energy, is projected to have risen by a modest 0.2% in December. This aligns with the objectives of Federal Reserve policymakers aiming to bring down inflation.

The December figures are likely to reinforce the Fed’s confidence in the positive progress of disinflation. Factors such as holiday discounts and imported disinflation from China are believed to have contributed to a decline in core goods prices, while core services prices experienced a moderation.

Market indicators, particularly estimates of recently agreed-upon rents, suggest that housing inflation is poised to decrease to 3.5% by the end of 2024. Despite this, our house view indicates that underlying CPI inflation is running at a pace closer to 3% than the Fed’s 2% target. The disinflationary trend for core goods is expected to ease in the second half of the year as companies finalize destocking excess inventories.

The Saracen Markets Analyst team predicts a 0.2% estimate for the monthly change in the headline index in December, with their estimate for the core index slightly below consensus.

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