In this morning’s data, the Consumer Price Index decreased -0.1% in December, as expected and lower than the previous month, and grew 7.1% on an annual basis. Monthly prices for Utility (piped) gas service, up 3.0%, were strong, while monthly prices for Fuel Oil, down -16.6%, Gasoline, down -9.4%, and Used Cars and Trucks, down -2.5%, were weak. The core rate, which excludes prices for food and energy, increased 0.3% in December, also as expected and but slightly higher than the previous month, and increased 5.7% on an annual basis. Meanwhile, Initial Jobless Claims remain low, at 205,000 for the week ending Jan 7th and Continuing Claims were lower than expected at 1,634,000 for the week ending December 31st.
Overall, a decent report on inflation as the headline number decreased from the previous month and annual figures continue a downward trend. However, the core rate increased slightly more than the previous month and the annual increase for the core rate remains well above the target of 2% on average set by the Federal Reserve. In addition, jobless claims provide a reminder of the resilience in the labor market. The Fed will need to see inflation measures well on their way to their goal before they adjust their policy, as noted by many officials recently commenting on keeping rates higher for longer to ensure this occurs. As we move into earnings season, how these dynamics couple with company commentary and earnings revisions will be a key component for the financial markets and the economy in the coming weeks.
In all, the 10-year US treasury yield is lower after initially ticking higher following the report and equity futures are higher as we head into the market open.
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