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- 13 Jan 2023
- ICICIdirect Research
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US INFLATION EASES FOR SIXTH CONSECUTIVE MONTH
News: US inflation eased for a sixth consecutive month and came down to 6.5% from a four decade highs of 9.1% seen in June 2022. It was a third straight month that inflation came below or in line with market expectations. Core CPI, which excludes energy and food, rose 5.7% in December from a year earlier, easing from 6.0% in November. Inflation eased amid decline in cost of gasoline and used cars and trucks. Prices of cars and trucks, which had contributed heavily to inflation last year, declined by 8.8% on an annual basis. On a month on month basis, prices of cars and trucks declined by 2.5%. Even energy inflation, has declined by 4.5% on MoM basis. Moreover, prices of food increased by 0.3% in December on a MoM basis, the smallest gain in nearly two years. However, shelter index, which holds nearly 38% weight in overall inflation numbers remains on higher side and was up 7.5% in December compared to 7.1% in November over last year. After the data huge volatility witnessed across the asset classes, the dollar index plunged sharply to 102.30 levels and US stocks climbed. Even the US 10 year treasury yields slipped to 3.445% and US two year yields came down to 4.14%
Views: The rupee is likely to appreciate further till 80.60 level in the coming days amid weakness in the dollar and softening of crude oil prices. The dollar is losing its strength and is likely to slip further till 101 levels as softer than anticipated inflation data raised expectations that Federal Reserve would slow down the pace of its rate hike and may even pause it sooner, going forward. There are increased chances of smaller rate hike in February and CME fed tool watch indicates 94.2% probability of a 25 bps rate hike in February meeting
Impact: Positive