Inflation data changes Fed expectations

The information showing that inflation has slowed in the USA also changed the expectations for the rate hike measure from the Fed in the next meeting.

The highly anticipated December inflation in the USA was 6.5 percent annually. This was recorded as the lowest number of more than 1 year deadline. Core inflation, which does not include food and energy, also recorded the lowest increase in a year at 5.7 percent.

Investors think that the slowdown in inflation will reduce the Fed’s rate of increase in interest rates. In the meeting to be held on January 31-February 1, a 25 basis point increase in interest rates is expected. There are also expectations that interest rates will not be increased in March. An increase of less than 50 basis points is expected for the next 2 meetings in the swap markets.

Thompson Costerg, Senior US Economist at Pictet Wealth Management in Switzerland, said, “Fed may continue to rise by 25 basis points at its February meeting, with services inflation slowing in today’s data.”

Again, the information released today showed that unemployment benefits applications in the country remained at historically low levels last week.

“December inflation data gives the Fed room to lower the rate of interest rate hikes at its February 1 meeting,” said Anna Wong, economist at Bloomberg Economics. We think that the peak level in interest rates will be 5 percent in March and the year will remain at this level.” spoke in.

Piper Sandler & Co. in Washington. Research Manager Roberto Perli stated that the baseline scenario for February is an increase of 25 basis points, “but there is still a risk of an increase of 50 basis points. The most valuable will be what the peak level will be. “I don’t think today’s data has changed the Fed’s 5% peak expectation,” he said.