US CPI inflation data is scheduled to be announced on December 13, 2022 (Tuesday) at 8:30 AM Eastern Time (ET). The November inflation numbers are crucial since they will likely determine how the US Federal Reserve will act tomorrow. The Fed’s FOMC meeting underway on December 13-14 and the central bank is expected to raise interest rates by 50bps on Wednesday.
Latest Update: US CPI eases to 7.1%, stock market reacts positively
The US economy is still struggling with 40-year high inflation that had crossed 8% in August. From a high of 8.3% in August, annual inflation fell to 8.2% in September and showed further cooling down to 7.7% in October. A considerable fall in November inflation data especially the core inflation figures will boost sentiments in stock markets as it sends signals that Fed may turn dovish sometime in early 2023.
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“Any number below 0.3% for monthly Core Inflation Rate and below 7.3% for Annual Inflation Rate will be seen positively by the markets as it may set the stage for slower rate hikes and much-awaited Fed Pivot,” says Dhawal Ghanshyam Dhanani, Fund Manager, Samco Mutual Fund.
“Last month in November, Powell had indicated that US Fed could be in for a slower pace of interest rate hikes and the inflation data will be keenly tracked,” adds Dhanani.
US inflation data could influence interest rate hike expectations for the upcoming year which in turn will help the stock market set the tone in 2023. The US November CPI report, to be released today, will influence how markets react to the Fed’s communication tomorrow. Tracking inflation data has been one of the key indicators for US stock market investors.
“We expect the US Fed to increase the benchmark rate by 50bps this week. Even with a 50bps hike, if the Fed Chairman comments that future action of the Fed will be data dependent, then the market will take it positively. But, if he mentions that inflation remains a major risk and the labor market remains tight, with a possibility of a second round impact on inflation from the tight labor market, then the markets might react negatively,” says Naveen Kulkarni, Chief Investment Officer, Axis Securities PMS.
Also Read – US Market Outlook 2023: Factors that may lead to rebound in US equities next year
As the market prepared for a crucial week that would include US CPI data and a Federal Reserve policy statement, U.S. stocks rose on Monday. The Dow Jones Industrial Average increased by 1.58% and the S&P 500 increased by 1.43%. Nasdaq Composite increased by 1.26%.
Tuesday’s US consumer price index report, which is anticipated to show that prices are still high but are slowing down, will be the focus of attention. According to JPMorgan Chase, the S&P 500 might gain by as much as 10% in the best-case scenario in response to a weaker CPI report, however, their analysis indicates that the likelihood of such occurring is only approximately 5%. How the market reacts to November US CPI data remains to be seen.
