Spot supply: US consumer prices fall in December

NEW YORK (Reuters) – U.S. consumer prices unexpectedly fell for the first time in more than two-and-a-half years in December amid falling prices for gasoline and other commodities, suggesting that inflation is now on a sustained downward trend.

The Labor Department said Thursday that its consumer price index fell 0.1% last month, after rising 0.1% in November. This was the first decline in the CPI since May 2020, when the economy was reeling from the first wave of COVID-19 infections.

Economists polled by Reuters had expected the consumer price index to be unchanged.

Market reaction:

Stocks: US stock index futures drop after inflation data Bonds: US Treasury yields fell across the board. Forex: The dollar fell against the euro and the yen.


Phil Blancato, CEO, Ladenburg-Thalmann Asset Management, New York

“This is in my opinion exactly what we wanted, not too hot, not too cold, a Goldilocks number that will set us up for a much better year this year.

The initial reaction is minimal, when you meet expectations, it means you won’t get a big shake in the market.”

I wouldn’t be surprised to see markets pull back a bit today with expectations of a lower than expected reading, which clearly didn’t happen.”

Brian Mulberry, Client Portfolio Manager, ZACKS INVESTMENT MANAGEMENT, Chicago

“The top line numbers fell right in line with expectations for both CPI and core CPI, which will confirm the market’s notion that inflation has peaked and that we likely won’t retest the high of 9%+.

However, jobless claims came in below expectations by a margin sufficient to confirm the Fed’s position that strong labor markets tend to increase spending on services.”

Bottom line, this doesn’t move our belief that we will see prices continue to rise and will likely remain at 5% or higher throughout approximately 2023.”

Maria Vassallo, Partner Investment Officer, Multi-Asset Solutions, Goldman Sachs Asset Management, New York

“The market has priced in a very bullish scenario on CPI in the previous days. The numbers came in exactly as expected. This means that some of the optimism in the markets may be fading in both equities and fixed income. While the 25-bps rally remains at the meeting The next Fed is in action, and housing strength in core CPI and benign jobless claims supports a scenario of a 50bp hike at the next meeting.However, what matters to markets is the final Fed rate, not the pace of hikes.The closer we get to the rate Final, the pace of the hikes should slow down.”

Quincy Crosby, President, Global Strategy, LPL Financial, Charlotte, North Carolina

“That’s tough for the (equity) market. The market was expecting a cooler number, especially since rents are starting to come down a little bit in this report, but it didn’t. The market was desperate to cross over 4,000 to 4,100; that’s going to make that difficult.”

Ian Lingen, Head of US Price Strategy, BMO Capital Markets, New York

“I think the expected CPI headline and fundamental really contributed to the idea that the Fed is going to turn lower again, whether it’s in February or the March meeting remains to be seen, and we’ll be watching for data coming in as the Fed talks about whatever Guidance throughout the day in this regard.

The fact that we saw core inflation slow to 5.7% yoy, from 6% in November, strengthens the peak inflation argument. Similarly, on a headline basis, we were down to 6.5% from 7.1%. All of this is consistent with the Fed’s interpretation of the delayed impact of monetary policy and the cumulative effect of the tightening they have already achieved.

So market talk will quickly turn to how long the Fed will actually be able to keep the terminal in place once it’s achieved, and I think that’s what’s going on in the Treasury market at the moment, and we’re seeing a net decline in rates pretty much across the curve. But I will note that it’s a particularly volatile period, and it’s not unusual for inflection points in the broader market and macro outlook. “

Brian Klimke, Chief Investment Officer, CETERA INVESTMENT MANAGEMENT LLC, Los Angeles

“It (the report) came out as expected, but investors were fairly bullish before this reading, so they were buying the rumor and selling the new. They were kind of expecting (the) as expected or a better-than-expected read. So they were bidding on the markets at the time Early, and now that the news is out, they’re selling. We’ve seen it before where investors are anticipating, and then as soon as the news comes out, they sell off a bit.”

Compiled by the Global Finance & Markets Breaking News team

Our standards: Thomson Reuters Trust Principles.

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