Tonight’s CPI report will determine whether the Fed raises rates in December. Markets are already pricing in more than an 80% chance of a hike.
At 9:30 p.m. Beijing time, the U.S. October CPI report will be released. It’s the last inflation report before the December 8–9 FOMC meeting. Dow Jones consensus is +0.3% month over month, with core CPI at +0.2%—cooler than September’s +0.6% and +0.3%, respectively. Gasoline prices fell 4%, which should make headline CPI look a little better, but core services prices remain sticky.
BofA estimates headline CPI at 3.8% year over year and core CPI at 2.7%, both 0.1 percentage point higher than in September.
The Fed held rates steady in October at 3.75%–4.00%, but two members dissented, calling for an immediate 25-basis-point hike. CME FedWatch shows markets are pricing in a more than 80% chance of a 25-basis-point hike in December.
Economic data doesn’t support rate cuts. October nonfarm payrolls increased by 165,000, versus expectations of 59,000; the unemployment rate was 4.1%; third-quarter GDP was 3.4%, and the Atlanta Fed’s GDP tracker puts fourth-quarter growth at 3.5%. The economy is not weak; inflation is the problem.
BofA says that unless CPI comes in at an exceptionally weak 0.1%, a December hike is basically locked in. The bigger wildcard is the stock market: if the AI selloff gets out of control, the Fed may hesitate to act for fear of making things worse.
Nvidia and Intel have been beating me up all week. If the AI selloff gets out of control,
Nvidia and Intel will be a long way from returning to their highs.
For $BTC , tonight is a test of liquidity. It’s hovering around $74,000, and a hot CPI reading would push up 2-year yields and weigh on risk assets. A soft CPI reading could bring a rebound, but don’t mistake it for a signal that rate cuts are coming.
My view: the base case is a 25-basis-point hike in December. If month-over-month CPI is above 0.3%, the hike is all but certain; only a 0.1% reading would leave room for a pause.
For trading, don’t bet on the data with high leverage. Wait until after 9:30 p.m. and watch the first 15-minute candle, along with the reaction in 2-year yields and BTC, before making a move.
Not investment advice
#cpi前瞻，12月利率走向迎关键考验
At 9:30 p.m. Beijing time, the U.S. October CPI report will be released. It’s the last inflation report before the December 8–9 FOMC meeting. Dow Jones consensus is +0.3% month over month, with core CPI at +0.2%—cooler than September’s +0.6% and +0.3%, respectively. Gasoline prices fell 4%, which should make headline CPI look a little better, but core services prices remain sticky.
BofA estimates headline CPI at 3.8% year over year and core CPI at 2.7%, both 0.1 percentage point higher than in September.
The Fed held rates steady in October at 3.75%–4.00%, but two members dissented, calling for an immediate 25-basis-point hike. CME FedWatch shows markets are pricing in a more than 80% chance of a 25-basis-point hike in December.
Economic data doesn’t support rate cuts. October nonfarm payrolls increased by 165,000, versus expectations of 59,000; the unemployment rate was 4.1%; third-quarter GDP was 3.4%, and the Atlanta Fed’s GDP tracker puts fourth-quarter growth at 3.5%. The economy is not weak; inflation is the problem.
BofA says that unless CPI comes in at an exceptionally weak 0.1%, a December hike is basically locked in. The bigger wildcard is the stock market: if the AI selloff gets out of control, the Fed may hesitate to act for fear of making things worse.
Nvidia and Intel have been beating me up all week. If the AI selloff gets out of control,
Nvidia and Intel will be a long way from returning to their highs.
For $BTC , tonight is a test of liquidity. It’s hovering around $74,000, and a hot CPI reading would push up 2-year yields and weigh on risk assets. A soft CPI reading could bring a rebound, but don’t mistake it for a signal that rate cuts are coming.
My view: the base case is a 25-basis-point hike in December. If month-over-month CPI is above 0.3%, the hike is all but certain; only a 0.1% reading would leave room for a pause.
For trading, don’t bet on the data with high leverage. Wait until after 9:30 p.m. and watch the first 15-minute candle, along with the reaction in 2-year yields and BTC, before making a move.
Not investment advice
#cpi前瞻，12月利率走向迎关键考验
