Daily Alert – Wednesday 14th December 2022: US Inflation missed, just

Mark NugentDaily Alert, Dec 2022

Daily Alert – Wednesday 14th December 2022: US Inflation missed, just

Good morning.

Yesterday, US Inflation missed expectation to the downside. However, the miss was the smallest it could be. Month-on-month inflation was at 0.2 percent against an expectation of 0.3 percent. The same figure expressed on a year-on-year basis came in at 6.0 percent vs an expectation of 6.1 percent. So, nice to see a miss to the downside, but still three times the Federal Reserve’s mandate of 2.0 percent.

The crowd went wild. Equities shot up like a rocket ship. Then immediately came back down to where they were before the announcement. The USD and the US 10-year yield performed similarly, in the opposite direction, although neither returned to their pre-announcement level.

All eyes will now focus on tonight’s FOMC Rate and Statement at 7pm UK-time and, critically, Fed Chair Powell’s press conference 30 minutes later. There is an expectation of a 50 basis-point hike, which is less than the preceding four hikes of 75 basis-points. Those of a skittish disposition prone to confirmation bias will see “Fed pivot” in everything the Fed says and does. I suspect Powell will hammer home the message that inflation is still much higher than the Fed’s mandate and he will reiterate the need for high rates over an extended period to tame this beast.

I will be back tomorrow.

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