US November inflation down to 7.1%; end in sight?
The US Bureau of Labor Statistics [link] reported that US November inflation, as measured by the Consumer Price Index (CPI), declined to 7.1% y/y, down from the 7.7% CPI result in October.
US markets responded first by pumping, then by dumping, and as of this writing, were basically flat on the day.
The US Dollar came under heavy selling pressure.
US analysts called this result a “game changer”, and suggested that it could signal that inflation is slowing at a faster-than-expected rate, and that the US Federal Reserve might not need to raise rates above 5% in 2023.
The surprisingly “soft” inflation result likely won’t change what the US Federal Reserve does later this week (a 50 basis point increase is still expected), but it might reduce a follow-up rate increase in February.
MB BOTTOM-LINE
While US inflation isn’t (exactly) PH inflation, our leaders have (recently) been looking to the US as a guide for how to weather the storm.
This wasn’t always the case, as the BSP under Benjamin Diokno tried to set a more defiant tone in its interest rate interventions, but the BSP under Felipe Medalla has been remarkably open and transparent with its plan to follow the Fed’s lead.
Nearly all assets classes are up (stocks, bonds, gold, etc), and the sentiment around the result appears to be positive.
At least in terms of seeing an end in sight to the near-vertical interest rate increases, and to eventually pushing inflation back down to the target range.
This feels like it could be a green day on the PSE for stocks and fixed-income assets (like REITs). Let’s see what happens.
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Merkado Barkada's opinions are provided for informational purposes only, and should not be considered a recommendation to buy or sell any particular stock. These daily articles are not updated with new information, so each investor must do his or her own due diligence before trading, as the facts and figures in each particular article may have changed.
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