On Friday local time, the US Bureau of Labor Statistics released its annual revised Consumer Price Index report, which showed that the core CPI annual rate for the fourth quarter of 2023 was 3.3%, unchanged from previous data. But the monthly CPI rate in the United States was revised to 0.2% in December, compared to 0.3% previously.
This better than expected correction will give Federal Reserve officials a sigh of relief as they are seeking more evidence that price pressures are continuing to dissipate before they begin to lower interest rates. In the second half of last year, inflation rapidly slowed down, but policymakers expressed doubts about whether this rapid slowdown could continue.
Federal Reserve Director Waller previously emphasized that as inflation continues to decline, the Fed is expected to lower interest rates this year, but this process should be approached with caution and not rushed. Waller also stated that he will focus on CPI correction data, and financial markets and analysts have been eagerly anticipating it ever since.
But Brian Jacobsen, Chief Economist of Annex Wealth Management, commented:; Quota; The CPI correction data is a complete exaggeration. Federal Reserve officials mention a certain data and everyone holds their breath, only to find that it is just a pile of noise, which is becoming a trend& Amp; Quota;
Jacobsen gave an example that Chairman Powell once mentioned that the initial value of the University of Michigan Consumer Confidence Index was important, but now it is no longer important. Supercore inflation was once considered important, but now it is no longer important. The annualized inflation rate of the past three months is important, but it is clearly not important now. The same thing happened with the correction of CPI. Perhaps the Federal Reserve's reference to data release is more of an important indicator in reverse, rather than anything they actually see.
Although the December CPI data was revised downwards, the November CPI data was revised upwards, with an initial expectation of 0.1% and a revised 0.2%. The CPI data for October remained unchanged.
The data correction comes from recalculating seasonal adjustment factors, which is a model used by the US government to remove seasonal fluctuations from the data. Usually, the annual correction of the CPI index does not attract special attention, but this data was significantly revised up at the beginning of last year, and of course, there is also a comment from Waller.
Steven Ricchiuto, Chief Economist of Mizuho Securities in the United States, stated that these CPI revisions will not prompt the Federal Reserve to cut interest rates. The key now is that the Federal Reserve is not in a hurry. The market is in a hurry, but the Federal Reserve sits there and says, 'We're not in a hurry.'. In fact, from their perspective, things are really good.
Paul Ashworth, Chief North American Analyst at Capital Economics, said that some Federal Reserve officials are concerned that the situation from last year will repeat, but there have been no meaningful changes this year, at least to some extent supporting interest rate cuts in early May.
The fourth quarter CPI inflation data will have an impact on the Personal Consumption Expenditure (PCE) price index, which is an indicator used by the Federal Reserve to determine whether the 2% inflation target is being achieved.
The market generally expects the Federal Reserve's next action to be a rate cut, and many now expect the first rate cut to be in May. The inflation data in the coming months may have a greater impact on when the central bank will cut interest rates for the first time. The New York Fed's Williams previously stated, "It is only appropriate to adjust the degree of policy constraints when we are confident that inflation is continuing to move towards 2%."
After the report was released, traders still generally expected the Federal Reserve to keep interest rates unchanged at its next meeting in March, followed by a rate cut in May, and four more 25 basis point cuts before the end of the year, according to the interest rate observation tool of the ChiNext.