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- 12 Dec 2024
- ICICI Securities
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US CPI INCREASED TO 2.7% IN NOVEMBER
News: US inflation edged up in November but remain in line with market expectations at 2.7% in November after advancing 2.6% in October 2024. Core-CPI which excludes energy and food rose 3.3% in November remained unchanged compared to previous month. CPI on MoM basis increased by 0.3% last month after rising 0.2% in each of the previous 4 months. Indexes that increased in November include shelter, used cars and trucks, household furnishings and operations, medical care, new vehicles, and recreation. Despite persistently high inflation, encouraging news was that rents, one of the stickier components of inflation, showed the smallest 12-month increase since February 2022. Shelter prices rose 4.7% from year earlier. Services less energy services index eased to 4.6% in November from 5.5% same month year ago. The energy index declined by 3.2% for the 12 months ending November, and the food index increased 2.4% over the last year. Dollar and US treasury yields rallied yesterday and while Dollar rose to 106.62, 10-year treasury note edged higher to 4.273% and 2-year treasury yield, which typically moves in step with interest rate expectations rose to 4.155%.
Views: US inflation increased in the previous month but not that much that it would derail interest rate cut from US Federal Reserve in December. We expect US Federal Reserve to opt for smaller pace of rate cut in December meeting, its 3rd cut in a row. However, the progress in lowering inflation towards Fed target has started to stall, which could lead to fewer interest rate cut next year.
Impact: Neutral