"The market was expecting core inflation to come in at 3.0% for November, in an early gift to markets, core inflation came in at 2.6%. This provides markets with much needed clarity after the government shutdown. The initial market reaction has been positive with both equities and bond markets rallying strongly. All eyes will now turn back to the Federal Reserve. The message throughout 2025 has been one of caution. Clearly the Federal Reserve has been reticent of cutting too far too soon."
"There are a number of crosscurrents in play, there were question marks over the extent to which trade tariffs will feed through into the inflation numbers, and next year, whether the big, beautiful bill will cause a big, beautiful return of inflation next year. What's clear from todays' reading - US inflation is softer than many thought, and this paves the way for looser monetary policy in 2026. The Santa rally might be coming to town."
Core US inflation excluding energy and food was 2.6% in November, below the 3.0% market consensus. Energy costs rose 1.1% and food rose 0.2% over the two months to November. The annual inflation rate cooled to 2.7% from 3.0% in September. Equities and bond markets rallied strongly after the lower core reading. The Federal Reserve remained cautious throughout 2025 and has been reticent to cut rates too far too soon. Trade tariffs and large fiscal measures could feed through into inflation next year, but the softer reading supports prospects for looser monetary policy in 2026.
Read at London Business News | Londonlovesbusiness.com
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