Inflation data for November confirmed what many economists had expected: Inflation was likely to increase, which provided some relief. due to the highest inflation in more than 40 years. This is the last consumer price increase read on Tuesday. The broad basket of goods and services showed a price increase of 0.1% last month, translating to an increase of 7.1% from a year ago. Although the rate of inflation remains very high, there is widespread agreement that the peak has passed. “Inflation was terrible in 2022, but the outlook for 2023 is better,” said Bill Adams, Comerica’s chief economist. “Supply chains are working better, business inventories are higher, closing most of the deficits that caused inflation in 2020. Energy price increases have moderated recently. the next few months, and food prices also fell slightly in November.” Indeed, the soft CPI reading comes as broad-based costs either eased or eased. Energy prices fell 1.6% for starters. Used car prices fell 2.9%, leading inflation this cycle. Bacon was down 1.8%, seafood was down 1.4% and airfare was down 3%. And workers finally got a break, with hourly earnings rising 0.5% for the month, though they were still down nearly 2% on the year. – gone. There is also hope that geopolitical forces can help lower prices. If China continues to reopen and move away from the zero-Covid policy, this should provide a disinflationary boost. But what is happening here is the most difficult. ‘Normal’ trend The Federal Reserve raises interest rates – six in total, bringing the central bank’s short-term lending rate to 3.75 percent, with more to come – the economy has not yet finished. Central bank officials like to say that monetary policy adjustments take place over a “long and variable period” that usually does not include at least a year. In fact, the only sector that has raised interest rates so far is housing. So, with a lot of stimulus that is still in the pipeline, weak inflation is still to come along with the economic slowdown. Critics of the Fed worry that rate hikes may go too far and could weigh heavily on the economy as inflation eases. “The decrease in prices seems to be driven by the normalization after the epidemic (last) playing more than 425. [basis points] rate hikes (including a possible 50 bps hike tomorrow) have put the Fed on hold,” said Josh Jamner, investment strategist at ClearBridge Investments. 2023 and the economy appears to be weakening on its own, lending the risk of a higher recession to what we see next year. This is likely, given that the Atlanta Fed is monitoring growth GDP in the fourth quarter of 3.2%, which would be the best of the year. The Fed’s reduction of $ 95 billion per month in bond holdings. As inflation slows and cools the economy, there is reason to warn that the “shallow” this year may be similar to the 2021 statement. life to normal,” said PNC senior economist Kur t Rankin. “But the risk the Fed is willing to take is that inflation that isn’t completely poisoned by the PNC’s regressive outlook could cause more damage to the US economy.” If the economy is weaker than expected in 2023, that creates another problem for the Fed. If the recession turns out to be worse and longer than expected, market and political forces could apply pressure for the Fed to start tapering again. “We may be on track for 2% inflation as there is a recession next year,” said Joseph LaVorgna, chief economist at SMBC Nikko Securities. “In this era of transparency and political background, I can’t imagine calling for them to start slowing down if the economy is in a recession next year.” The Fed ended its two-day policy meeting on Wednesday, with markets expecting a 0.5 percent increase in the federal funds rate. This will bring the short-term lending rate to 4.25%-4.5%, the highest in more than 15 years. However, after the CPI report, traders bought prices at a lower “rate”, or the last point of the Fed’s rate hike. Markets now expect the central bank to raise interest rates to around 4.84% before stopping, lower than the peak of 5%.
