"Leading into this latest US inflation print, markets have been eerily quiet, this is despite the brewing geopolitical risks and a fresh attack by the US president on the independence of the world's largest central bank. Predicting where inflation is headed is always a challenge, it is particularly so at present. The strong unemployment read from last Friday will be fresh on investors' minds. Many have lowered their expectations for rate cuts in 2026 as a result."
"On the other hand, the world might just be on the cusp of a technology-led productivity boom, potentially a major disinflationary force for years to come, this may explain why the previous inflation data release was far weaker than many had predicted. The market was expecting core inflation to come in at 2.7% for December, core inflation came in a touch lower at 2.6%."
Core US inflation measured excluding energy and food fell to 2.6% in December, slightly below the 2.7% market consensus. Housing costs were a key driver, rising 0.4% for December. Food and energy costs increased by 0.7% and 0.3% respectively. The annual inflation rate remained unchanged at 2.7% for December. Markets reacted with modest relief as equities and bond markets rallied and the dollar softened. Markets were unusually quiet despite brewing geopolitical risks and a fresh attack on central bank independence. Strong unemployment data reduced expectations for 2026 rate cuts while a potential technology-led productivity boom could be disinflationary.
Read at London Business News | Londonlovesbusiness.com
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