Bets that the Federal Reserve will cut interest rates later in December have jumped after inflation came in as expected during November.
According to the US Bureau of Labor Statistics, the consumer price index ticked up 2.7% on an annual basis in November and by 0.3% month on month.
Core inflation, excluding volatile energy and food items, climbed by 3.3% year over year, with the readings matching analysts' expectations.
Analysts had noted that a lack of any major surprises would likely firm up the probability of a 25 basis point rate cut in the Fed's meeting next week.
Markets reacted to the reading by pricing in a reduction as a near certainty as a result.
“Given how restrictive policy has been this year, there is wiggle room for the Fed to lower rates this month without triggering an uptick in inflation,” Capital.com analyst Daniela Sabin Hathorn said.
“In fact, with Trump taking office in January, many economists have predicted that his tariff and tax plans will increase price pressures, meaning the Fed will be limited next year with regards to how much it can lower rates.
“Because of this, a cut in December seems like a valid move as it brings the rate closer to normalisation before the tide may turn next year.”
Capital Economics' Paul Ashworth echoed the view, noting the reduction would take the Fed's policy rate to between 4.25% and 4.50%.