The post US PPI Hits 3% Year-Over-Year, Sparks Concerns Over Fed’s Hawkish Move appeared first on Coinpedia Fintech News

According to the latest data, the US PPI rose 3% from the year prior, up from the 2.4% in October, and above the 2.6% increase economists had projected. This marked the highest year-over-year increase since February 2023. Thursday’s PPI reading comes one day after the release of the November CPI index showed core inflation rose 3.3% for the fourth-straight month. The hotter-than-anticipated figure has also sparked concerns over a potential hawkish move by the Fed in the next week. Also, Still inflation is not quickly falling toward the Fed’s 2% target which has prompted investors to anticipate fewer Fed rate cuts in 2025 than initially expected.

According to BlockBeats, on December 12, the release of the U.S. initial jobless claims and Producer Price Index (PPI) data led to a narrowing of the decline in U.S. Treasury yields. Following the announcement, the U.S. Dollar Index (DXY) experienced a brief drop of 10 points, currently standing at 106.72.

A FED economic report, expected to be released on December 12, could highlight stalled progress in curbing inflation in the United States. Economists are uncertain whether the data will dissuade the Federal Reserve from implementing a widely expected interest rate cut during its policy meeting next week.

According to recent updates from Trading Economics, the annual inflation rate in November has climbed to an expected 2.7%, a modest increase from October’s 2.6%, marking the second consecutive month of rising inflation. 

BREAKING: November CPI inflation RISES to 2.7%, in-line with expectations of 2.7%.

Core CPI inflation was 3.3%, in-line with expectations of 3.3%.

Headline CPI inflation is now at its highest level since July 2024.

Inflation has leveled off above the Fed's 2% target.

— The Kobeissi Letter (@KobeissiLetter) December 11, 2024

Analysts attribute part of the uptick to low base effects from the previous year. On a month-to-month basis, the Consumer Price Index (CPI) is forecast to rise by 0.3%, surpassing October’s 0.2% increase and marking the highest monthly gain since April.

The CPI rise, per a CNBC report, is primarily driven by higher prices for used cars, airfares, apparel, and car insurance. Gasoline prices, in contrast, are expected to show a slight decline. 

Core inflation, which excludes volatile food and energy prices, remained steady at 3.3% year-over-year, with monthly core inflation also holding at 0.3%, matching the rate observed in October.

CPI index suggests US inflation numbers will go up

The CPI, a broad measure of the cost of goods and services across the U.S. economy, serves as a key gauge of inflationary pressures. The Dow Jones consensus estimate aligns with other forecasts, showing a 2.7% year-over-year increase in November’s CPI. This slight acceleration would challenge the Federal Reserve’s goal of achieving its target inflation rate of 2%.

“Looking at these measures, there’s nothing in there that says the inflation dragon has been slain,” commented Dan North, senior economist at Allianz Trade Americas. “Inflation is still here, and it doesn’t show any convincing moves towards 2%.”

The upcoming inflation report will be closely followed by another significant data release: the Producer Price Index (PPI). Scheduled for December 14, the PPI, which tracks wholesale prices, is expected to show a modest 0.2% monthly gain. Together, these reports will provide critical insights into the current trajectory of inflation in the U.S.

Opinion poll: Federal reserve’s could cut rates

Despite the stubborn inflation figures, the Federal Reserve is widely expected to lower interest rates by 25 basis points at its December 18 meeting. This would bring the federal funds rate to a range of 4.25% to 4.50%. 

According to a Reuters poll, 90% of economists anticipate the rate cut, bolstered by recent labor market data that signaled cooling but resilient conditions.

The Fed will likely cut rates next week even though inflation is running at over 3% annually.

Why?

I have no idea. Because the market wants it?

It’s become a clown show at this point.

Theres no justifiable reason to cut rates imo.

But they will.

— QE Infinity (@StealthQE4) December 11, 2024

The U.S. job market’s slower pace of growth, alongside steady income and employment gains, has reassured policymakers that the economy can withstand another rate cut before the Fed takes stock of potential shifts in government policy next year.

“With the jobs report showing more slack despite solid income and job gains, we reiterate our call for another 25bp Fed cut in December,” said Jonathan Millar, senior U.S. economist at Barclays. Miller believes interest rate futures have already priced at a likelihood of a quarter-point reduction.

Future monetary policy views 

Meanwhile, a majority of surveyed analysts believe the Fed will hold rates steady at its January meeting, scheduled just over a week after President-elect Donald Trump’s inauguration on January 20. 

Concerns about rising inflation risks under Trump’s proposed economic policies, including import tariffs and tax cuts, could influence the central bank’s decisions.

“They (the Fed) are going to wait to see what happens next year, what is actually implemented versus what is kind of presented as a risk,” noted Stephen Juneau, a U.S. economist at Bank of America.

The Federal Reserve’s long-term goal is to bring interest rates to a neutral level, estimated at around 2.9%. Fed Chair Jerome Powell recently stated that policymakers “can afford to be a little more cautious” as they strive to find a neutral rate, citing a stronger-than-expected economy and inflation rates exceeding earlier forecasts.

The U.S. economy expanded at an annualized rate of 2.8% in the last quarter, and economists forecast growth of 2.1% in 2025 and 2% in 2026. These rates surpass the Federal Reserve’s estimate of the non-inflationary growth rate of 1.8% over the coming years. However, inflation concerns persist.

From a majority of financial economic experts polled by Reuters, 75% believe there is a high risk of inflation resurging next year. 

Moreover, David Seif, Nomura’s senior economist for developed markets, cautioned that core inflation could rise significantly above 3% by mid-2025. Seif linked the rise to higher tariffs and potential supply chain disruptions likely to result from aggressive trade policies under the incoming Trump administration.

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U.S. Treasury yields remained largely unchanged Wednesday as investors embraced the rising consumer price index (CPI) data. The consumer inflation figures are pivotal for investors and could lead to the Federal Reserve cutting interest rates next week.

A Dow Jones survey predicted that the MoM CPI would rise from 0.2% to 0.3% in October. The YoY inflation figures are out as analysts expected and have settled at 2.7% from 2.6%. The Core MoM CPI and the Core YoY CPI have remained the same at 0.3% and 3.3%, respectively, as speculated by economic analysts. 

Consumer Price Index (CPI) data could pave the way for rate cuts next week

BREAKING! US headline #inflation rose to 2.7% in November, matching expectations.Core inflation was stable at 3.3%, which was also in line with expectations.This should be enough for the #FederalReserve to cut rates again in December. pic.twitter.com/eLut3iSMtG

— jeroen blokland (@jsblokland) December 11, 2024

The rising inflation data could signal a good chance of a rate cut by the Federal Reserve next week. According to CME Group’s FedWatch tool, traders anticipate an 86% chance that the Fed will cut rates in its next meeting. On December 18th, the Fed will announce the next interest rate decision, share other economic data points, and discuss the current U.S. economic outlook.

The November producer price index (PPI) numbers come a day after the consumer price index. PPI tracks wholesale inflation and is set to be released on Thursday. Market participants anticipate that the MoM PPI numbers will decrease from 0.3% to 0.2% while the YoY PPI figures will increase from 3.1% to 3.3%. 

The U.S. Treasury yields rose on Tuesday. The yield on the 10-year Treasury was up more than 3 basis points to 4.23%, while the 2-year Treasury also rose more than 2 basis points to 4.149%. 

On December 10th, Michael Green, the chief strategist at Simplify Asset Management, told CNBC that the market experienced a weak bond auction, yet it was neither terrible nor great. He cited confusion and uncertainty about today’s CPI numbers as the reason for the weak bond market.

The core CPI numbers track inflation but exclude volatile items like food and energy prices, providing a more stable measure of underlying inflation trends. On the other hand, the standard CPI includes all inflation-tracking items, such as goods and services, reflecting overall price changes across the economy.

MoM Producer Price Index set to increase from 0.2% to 0.3%

The MoM PPI figures are set to increase from 0.2% to 0.3%, while the YoY PPI numbers are expected to increase from 3.1% to 3.3%. On the other hand, the Core MoM PPI figures are set to decrease from 0.3% to 0.2%, while the Core YoY PPI numbers are expected to increase from 3.1% to 3.3%. 

Potential policy changes in the U.S. and Canada could reset market expectations, with investors on edge. As the U.S. prepares for inflation-driven changes, Canada’s employment concerns have projected rate cuts that might further weaken the dollar.

The Fed is currently in a blackout period and is restricted from making public statements before the next Federal Open Market Committee meeting. Therefore, Fed officials will not provide any commentary regarding the central bank’s next move. 

In the November FOMC meeting, the committee reduced the federal funds rate by 25 basis points to 4.50%—4.75%, continuing the interest-rate-cutting cycle that started in September.

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On Wednesday, December 11, investors will get the US Consumer Price Index data.

As opposed to last month’s figure of 2.6%, the market is projecting inflation of 2.7%.

The crypto market is about to embark on a pivotal week, as all eyes are on the US CPI inflation statistics. This week also brings the US Producer Price Index (PPI) statistics, another important inflation gauge that the US Federal Reserve uses to determine whether or not to decrease interest rates. Considering Bitcoin and the altcoins are well poised for another surge, which may set new records in the near future, investors are anxiously awaiting this statistic.

There has been a significant upswing in the cryptocurrency market as of late, and many are betting that this trend will continue. Now that last week’s job statistics showed a solid labor market, traders are anxiously awaiting the US CPI inflation estimates. To put that in perspective, market estimates were for 220,000 new jobs in November, while the actual number was 227,000. Not to mention that November saw a jump in the US jobless rate from 4.1% to 4.2%.

High Volatility Anticipated

The economic data have an impact on the whole financial market, not to mention the crypto sector. However, important statistics such as inflation greatly influence market sentiment. On Wednesday, December 11, investors will get the US Consumer Price Index data, which they are now keenly awaiting. As opposed to last month’s figure of 2.6%, the market is projecting inflation of 2.7%.

Concurrently, the Core CPI, which does not include energy and food costs, is predicted to fall to 3.2% from 3.3% recorded in October. The risk appetite of traders tends to diminish when inflation figures come in hotter than expected. Conversely, on Thursday, December 12, the United States will release its PPI data, which is another important indicator of inflationary pressure. 

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Market expectations for a November Fed rate cut increased to 83.7% from 67.9%.

Key economic data in the form of CPI and PPI will shape market sentiment this week.

Crypto markets face selling pressures despite optimism in equities.

At the Federal Reserve meeting on October 9, 2024, officials expressed a cautious stance on inflation, suggesting that the central bank may not be confident in its ability to combat rising prices. This has led investors to anticipate a smaller interest rate cut of 25 bps in November, with the probability increasing from last week’s 67.9% to 83.7%.

The latest Fed minutes show a less optimistic outlook on inflation as the central bank’s fight against inflation continues. The strong payroll data from last Friday also fueled speculation of a rate cut. The probability of a cut has increased significantly, and is now over 80%.

Read also : Fed Rate Cut: Dividend ETFs and Crypto See Massive Inflows

Having said that, the Fed’s recent interest rate cut sparked a rally in both the stock and crypto markets. U.S. dividend ETFs recorded a surge in inflows, attracting $3.05 billion in September. At the same time, Bitcoin’s gained 15% alo…

The post Fed Hints at Smaller Rate Cut as Inflation Persists appeared first on Coin Edition.

Inflation in the US has increased to 2.8% for October, raising concerns. Core PCE inflation has increased to 2.8% for October, which reflects the average amount of money consumers spend monthly. All three inflation gauges are increasing as well. Core CPI, PCE, and PPI inflation are now rising at the SAME time.

Inflation has leveled off above the Fed’s 2% target. The Core CPI has been above 3% for 42 consecutive months, which effectively means we have compounding inflation. President-elect Donald Trump’s proposed tariffs on China, Canada, and Mexico could also increase consumer prices and push inflation back up.

This could impact crypto markets as high interest rates are usually bad news for risk-on assets such as crypto since lower-risk cash-related investments become more attractive.

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<p>The post US Inflation Alert: 3 Metrics Rise, Trump Tariffs Impact, Crypto Resilient first appeared on CoinBuzzFeed.</p>

According to Odaily, the U.S. stock market saw an upward trend after the release of July's Producer Price Index (PPI) data, which came in lower than anticipated. Following the market opening, the three major indices experienced gains. The Dow Jones Industrial Average increased by 0.22%, the S&P 500 rose by 0.63%, and the Nasdaq Composite climbed by 1%. Additionally, Coinbase's stock price reached $192.9, marking a 0.6% increase.

Societe Generale has highlighted that the differing expectations between the Producer Price Index (PPI) and the Consumer Price Index (CPI) are primarily influenced by the energy sector. According to a report by Jinshi, the PPI encompasses a broader range of energy price inputs compared to the CPI, leading to distinct projections for inflation indicators.Anticipated Decline in PPIAnalysts expect the PPI to experience a significant decline in September, largely due to fluctuations in energy prices. The report indicates that the rising costs of natural gas, which have surged since August, are playing a critical role in shaping these expectations. This increase in natural gas prices is expected to affect overall production costs, subsequently influencing the PPI.Implications for Inflation MetricsThe disparity between PPI and CPI highlights the complexities of measuring inflation in the current economic landscape. As the PPI reflects wholesale prices that producers face, a notable drop could signal easing production costs, while CPI measures consumer prices and may not respond as swiftly to changes in the energy sector. This difference may lead to varying interpretations of inflation trends moving forward.