The latest numbers from the Labor Department indicated that Consumer Price Index (CPI) cooled down to 6.5% for the month of December as energy and food prices took a breather. This was the smallest yearly increase since the period ending October 2021 and was in line with the expectations of economists.
The easing of inflation comes after a tough 2022 for the markets and a relentless Fed, which was focused on reigning in inflation with ever-higher interest rates.
Core CPI, which excludes energy and food prices, came in at 5.7% as compared to the earlier 6.3% mark. The figure comes after four mega rate hikes last year and increases expectations of a 0.25% rate hike early next month.
The central bank though could keep rates elevated for longer until its stated goal of inflation at 2% is achieved, or at least in sight. This could mean the specter of a long period of high-interest rates for investors.
Further, the recent jobs report has indicated tell-tale signs of peaking inflation, which could lend the Fed more legroom to maneuver in February. Additionally, a combination of slowing wage growth and a softening economy has led to an easing of mortgages rate and a consequent uptick in mortgage applications. Nonetheless, refinancing activity remained about 80% lower as compared to the year-ago period.
Earlier this week in Sweden, US Fed Chair Jerome Powell skirted past rate hike discussions but noted that restricting inflation can mean taking actions that may not be widely applauded but are necessary.
Futures were negative as the CPI data came in while yields are taking a tumble and bears are racing to unwind short positions.
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