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Posted December 20, 2024 at 9:45 am
The latest data from November shows a cooler inflation trend, which might just nudge the Federal Reserve toward changing its current policy stance, affecting bonds and stocks alike.
The personal consumption expenditures (PCE) price index ticked up by just 0.1% in November, down from October’s 0.2% climb, indicating a calming inflation trend. Meanwhile, core inflation, which excludes more volatile costs like food and energy, also edged up by 0.1%, resting at an annual rate of 2.8%. These modest increases could reduce the pressure on the Federal Reserve to maintain its strict policies. In response, the S&P 500 trimmed losses slightly to -0.51%. On the fixed-income side, US Treasury yields dipped, with the 10-year at 4.506% and the two-year at 4.259%. The dollar softened by 0.42% too. Economists suggest this cooling inflation doesn’t align with the Fed’s aggressive strategy, particularly as consumer spending remains low aside from autos, potentially paving the way for policy pauses or adjustments.
For markets: A breath of fresh air for investors.
With cooler-than-expected inflation metrics, there could be less turmoil in the bond markets, potentially lifting both yields and equities. As markets digest these calmer figures, investors might see a period of stabilization and growth momentum in select sectors.
The bigger picture: Navigating the data-driven landscape.
Despite November’s inflation overshooting the Federal Reserve’s 2% goal, the latest data hints at potential policy pauses in January unless new information suggests otherwise. This shift in fiscal behavior might signal strategic changes in how global economies and markets react to evolving financial landscapes, with significant implications for future policies.
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Originally Posted December 20, 2024 – Cooler Inflation Trends Could Ease Market Pressures
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