New Articles
  January 13th, 2025 | Written by

US Inflation Shows Signs of Cooling, But Caution Remains

[shareaholic app="share_buttons" id="13106399"]

Underlying US inflation appears to have cooled marginally towards the end of 2024, although the Federal Reserve remains cautious in its approach to rate cuts. According to a recent report from Bloomberg, the consumer price index (CPI) excluding food and energy is projected to rise by 0.2% in December, following a consistent increase of 0.3% over the previous four months. The core CPI, which is a more accurate indicator of underlying inflation, is expected to show an annual rise of 3.3%, unchanged from the past three months.

Read also: CMA CGM Postpones Peak Season Surcharges for US-Bound Shipments

Despite these inflationary pressures seemingly stalling, the job market continues to show strength. Government data indicated that over 250,000 jobs were added in December, surpassing forecasts, while the unemployment rate experienced an unexpected decline. This robust job market, combined with resilient consumer demand, has done little to dampen long-term inflation expectations, as a University of Michigan survey highlighted that 22% of respondents plan to purchase big-ticket items now to avoid future price increases, matching a high not seen since 1990.

Economists at major US banks have adjusted their expectations for future rate cuts in light of these developments. Federal Reserve officials suggested in December that only two benchmark rate reductions would occur in 2025, reflecting a more conservative stance compared to previous outlooks. Recent comments further imply a cautious approach to monetary policy in the coming quarters.

Contributing factors to the positive economic momentum include elevated household net worth, pent-up automobile demand, and wage growth outpacing inflation, as highlighted by economists at Morgan Stanley & Co. Upcoming consumer and retail sales data, expected shortly after the CPI report, are anticipated to confirm strong spending over the holiday season. Meanwhile, manufacturing data may signal stabilization within the industry, though at subdued levels, with a forecast of a 0.2% increase in factory output for December, consistent with November’s performance.

Global Economic Outlook

On the international front, potential US tariffs remain a hot topic in Canada as provincial premiers meet to strategize, with outgoing Prime Minister Justin Trudeau spearheading the discussions. Across Europe, the UK’s inflation data is set to take the spotlight following significant market turmoil, while economic activity indicators from China and Germany will be closely monitored. In Asia, a series of trade figures and central bank decisions will paint a broad picture of economic conditions as 2024 comes to a close. South Korea and Indonesia, in particular, are expected to make rate decisions amid differing economic challenges.

Source: IndexBox Market Intelligence Platform