CPI Significance This Week: Federal Reserve’s December Rate Cut

Key economic indicators, including the Consumer Price Index (CPI) and the Producer Price Index (PPI), are set to be released this week, shedding light on the Federal Reserve’s upcoming policy decisions. The recent surge in technology stocks has propelled major U.S. indices to new highs, with market expectations pointing towards an 85% likelihood of a 25 basis points interest rate cut by the Fed on December 18.

Last week, while the Dow Jones Industrial Average experienced a slight decline, the Nasdaq Composite Index soared over 3%, and the S&P 500 Index jumped close to 1%. This week, we can anticipate a clearer perspective on the Fed’s policy outlook with the release of key inflation indicators.

The Consumer Price Index (CPI) will play a vital role in determining the Fed’s interest rate decision this month. Industry experts predict a year-over-year increase of 2.7% in the November CPI, slightly higher than the previous month. The core CPI, which excludes food and energy prices, is expected to show a year-over-year increase of 3.3%, maintaining its upward trend for the fourth consecutive month.

According to market estimates, there is a high probability of a 25 basis points rate cut by the Fed this month, with key analysts expressing cautious optimism. The Fed’s final meeting of 2024 is being closely watched, with the hope that inflation data will not disrupt the current positive market sentiment.

In addition to inflation data, earnings reports from industry giants like Oracle, Broadcom, Adobe, and Costco, among others, are also eagerly anticipated. Seven major tech stocks, including Apple, Alphabet, and Amazon, reported significant gains, with the Roundhill’s Magnificent Seven ETF reaching an all-time high last week.

Analysts foresee a continued rally in the U.S. stock market, fueled by the strong performance of tech stocks. Investor sentiment remains upbeat, with expectations of a positive trend carrying into the new year. As we await further economic data and corporate earnings releases, the focus shifts towards the Fed’s upcoming meeting and its implications for the market’s year-end performance.