The notable US consumer price index was announced yesterday. Both the year-on-year change and the core year-on-year change were lower than market expectations and the previous figures. U.S. Treasury yields plummeted and the dollar fell sharply. It was the content that supported the 50 bp rate hike forecast at the last US FOMC meeting of the year, which will be announced today.
However, according to CME FedWatch, about 20% of the FOMC still support a 75bp rate hike. The current terminal rate forecast in the money market is 4.836% in May next year. It was 4.978% as of the 12th before the CPI announcement.
You can see that the market’s outlook is uncertain. Members’ interest rate forecasts after the FOMC meeting today and Fed Chair Jerome Powell’s briefing will provide some insight.
Although the inflation rate has slowed down, it is certain that it is still at an extremely high level of 7.1% compared to the previous year. The Chairman will make clear the need to continue raising interest rates in order to keep the numbers in line with the inflation target. It is also worth noting that the market sentiment, which was slightly dovish at yesterday’s US CPI, may be shaken back.
A series of UK price statistics will be released early in the morning in London. The November consumer price index is expected to grow 10.9% year-on-year, a slowdown from the previous 11.1%. However, it is higher than that of the United States. The recent UK employment report showed a further acceleration in wage growth. Fighting inflation is becoming more difficult than in the United States. At tomorrow’s meeting of the Monetary Policy Committee (MPC), the market consensus is for a 50 basis point hike. Attention is likely to be divided votes on each committee member’s degree of rate hike. At the moment, it is pointed out that opinions may diverge from keeping the rate unchanged to raising the rate by 75 basis points.
In addition, the UK Bureau of Statistics has postponed the November UK Producer Price Index, which was scheduled to be released today, to January due to data deficiencies.
Attention will be on his Fed policy rate at 4am tomorrow and what Chairman Powell said afterwards. However, it is assumed that the US dollar will continue to sell based on yesterday’s US CPI trend.
The aim is to sell back USDJPY.