In line with expectations, the annual consumer price inflation rate in the United States stabilized last month, offering further support for the Federal Reserve's likely decision to maintain interest rates during its announcement on Wednesday.
According to the Bureau of Labor Statistics, the headline inflation rate dipped slightly to 3.1% in November from October's 3.2%. On a monthly basis, consumer prices increased by 0.1% in November, slightly exceeding consensus.
The annual core inflation rate, excluding food and energy, remained unchanged at 4% in November, aligning with market expectations.
Tomorrow's Federal Reserve decision is expected to leave the federal funds rate range at 5.25%-5.5%, with growing expectations for a rate cut in 2024.
But some market watchers are forecasting a potential spike spike to 3.5% in December, sparking concerns about another rate hike in 2024.
Oliver Rust, Head of Product at Truflation, highlighted a disparity with the Bureau of Labor Statistics, particularly in the housing category. While the BLS reported a 0.4% rise in the shelter index, Truflation recorded a 0.68% monthly fall, raising concerns about the accuracy of government housing data.
Truflation's real-time CPI index revealed inflationary pressures in service-oriented sectors, with goods inflation trending downwards.
"We expect the strong employment situation will continue to put upward pricing pressure on services," Rust cautioned, predicting a rise in the headline CPI index to 3.5% by year-end.
Elsewhere, Nigel Green, CEO of deVere Group, warned of market optimism.
"Inflation remains sticky. The Fed will not want to take the risk of pivoting on policy too soon by cutting rates."
Green cautioned against premature market expectations and suggested that the Fed might maintain its stance despite market confidence.
As markets seem to anticipate a policy pivot, Green advised investors to diversify across asset classes and consider alternative investments.
"Will the Fed really pivot with inflation stubborn? We think not. Significant opportunities remain, but investors should avoid complacency."