November US CPI is in line with expectations, Fed rate cut ahead

Key Takeaways

US consumer prices rose 2.7% annually in November, keeping inflation above the Federal Reserve's 2% target.
Traders are expecting a quarter-point cut in the federal funds rate at the upcoming Federal Reserve meeting.

New November CPI data showed on Wednesday that consumer prices rose as expected, keeping the Federal Reserve on track for a rate cut next week, especially as the November jobs report pointed to announced earlier this month strong job growth.

The Consumer Price Index climbed 0.2% month over month, matching October's increase and economist estimates, according to the Bureau of Labor Statistics data released on Wednesday.

Core CPI, which excludes volatile food and energy prices, increased 0.3% from October and maintained an annual rate of 3.3%, meeting analysts' expectations.

The inflation report comes as markets widely expect the Fed to cut interest rates at its December 17-18 meeting. Traders are pricing in an 86% probability of a quarter-point cut in the federal funds rate, according to The CME Group's FedWatch tool.

The November jobs report, which showed a strong job gain of 227,000, reinforced the case for easing monetary policy. The figure exceeded expectations and marked a strong rebound from the previous month's lackluster performance.

The figure not only exceeded the Dow Jones consensus estimate of 214,000 but also reflected upward revisions in job gains for October and September, bringing the three-month average wage growth to 173,000.

While inflation has cooled significantly from its peak of around 9% in June 2022, recent data indicate that prices are stabilizing at levels above the Fed's target.

Bitcoin was trading above $98,000 ahead of the release of the inflation data, recovering from a recent dip below $94,000. The crypto asset has gained 2% in the last seven days, according to CoinGecko data.