The US Bureau of Labor Statistics released a delayed report on Thursday morning showing that consumer price growth in November was lower than expected, fueling investor hopes that inflationary pressures may be cooling sufficiently to allow for more monetary policy easing than Wall Street anticipates.
The report indicated that the US Consumer Price Index (CPI) rose 2.7% year-over-year in November. Economists surveyed by Dow Jones had previously forecast a 3.1% increase.
Core CPI, which excludes volatile food and energy prices, also came in below expectations, rising 2.6% over the past 12 months compared with an anticipated 3% gain.
This marks the first data report covering the period of the US government shutdown. The 43-day shutdown disrupted data collection processes and led to the cancellation of October CPI data, which was originally scheduled for release on December 10.
With October CPI data unavailable, Thursday's report lacked some regular data points typically included in CPI reports. The Bureau of Labor Statistics stated it couldn't retroactively collect October data but used some "non-survey data sources" for index calculations.
Given the absence of October comparison data, economists may remain cautious about whether this report signals the beginning of a downward inflation trend.
Nevertheless, investors are scrutinizing the report for clues about the Federal Reserve's future monetary policy moves. The Fed earlier this month cut its benchmark overnight rate by 25 basis points for the third consecutive time.
Tom Lee, Head of Research at Fundstrat, noted in a pre-report commentary: "A mild CPI reading would further confirm the Fed's focus on protecting the job market. This means the 'Fed put' is now in place. In other words, if the Fed perceives economic downside risks, the 'Fed put' would activate, potentially driving stock markets higher."
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