US Markets
Friday, February 9th, 2024 4:16 pm EDT
Key Points
- Consumer prices increased at a slower pace than initially reported, with updates to the consumer price index showing a rise of 0.2% on the month, compared to the originally reported 0.3%.
- The downward revision in inflation figures indicates a moderation in inflation as 2023 ended, potentially giving the Federal Reserve more leeway to consider interest rate cuts later in the year.
- While the revisions are standard practice for the Bureau of Labor Statistics, they garnered extra attention this year due to sharp market reactions to last year’s changes, indicating higher-than-anticipated inflation in 2022. Despite the revisions being described as “a damp squib” by economists, they could still influence the Fed’s decision-making process regarding interest rates.
The latest revisions to the consumer price index, released by the Labor Department’s Bureau of Labor Statistics, revealed that prices consumers pay in the marketplace rose at a slower pace than initially reported. The broad basket of goods and services measured increased by 0.2% on the month, down from the originally reported 0.3%. While this adjustment may seem modest, it signifies a moderation in inflation as 2023 concluded, providing the Federal Reserve with more flexibility to consider interest rate cuts later in the year. These revisions, standard practice for the BLS, attracted heightened attention due to market reactions to last year’s changes, which indicated higher-than-anticipated inflation in 2022 and sparked concerns about the Fed’s monetary policy. Fed Governor Christopher Waller’s remarks on the 2022 revisions drew particular market attention. The core CPI, excluding food and energy, remained unchanged at a 0.3% increase for the month, a measure closely monitored by Fed policymakers for its insights into long-term inflation trends. Despite a slight upward revision in the headline November reading, indicating a 0.2% increase rather than the initially reported 0.1%, aggregate revisions suggest a 2.7% annualized acceleration in headline CPI for the fourth quarter, slightly lower than initial figures. While these revisions may seem insignificant, economists believe they could influence the Fed’s decision-making process, potentially supporting an earlier rate cut in May. The Fed primarily prioritizes the personal consumption expenditures price index as its main inflation gauge, which factors into the Commerce Department’s PCE calculation, accounting for changes in consumer behavior when prices fluctuate. Despite the data release, futures market pricing remained relatively unchanged, with traders still anticipating the Fed to maintain its benchmark overnight borrowing rate in March before implementing rate cuts in May and potentially four more by the end of the year, according to CME Group projections.
For the full original article on CNBC, please click here: https://www.cnbc.com/2024/02/09/-inflation-in-december-was-even-lower-than-first-reported-the-government-says.html
