CPI Report Live Updates: Inflation Eased in November

Analysts said the latest inflation data will “set the tone” for financial markets in the coming year.Credit…Hiroko Masuike/The New York Times

Markets surged after November’s inflation report showed price gains had slowed more than economists expected, the last major data release before the Federal Reserve meets to set interest rates interest Wednesday.

S&P 500 futures rose 3% in premarket trading on Tuesday, before falling back, trading more than 2% and widening Earnings from the day before.

The consumer price report provided investors with a clear sign that inflation is slowing, prompting markets to take a big step forward. For months, Wall Street has been looking for data that might prompt the Fed to moderate its interest rate hikes, which it has used to try to temper stubbornly high inflation but which have also increased costs for businesses.

Headline inflation rose 7.1% from a year ago, while economists expected 7.3% and down from 7.7% in October. It’s a welcome sign for investors after a mixed bag of economic data in recent weeks delivered signals that inflation could remain stubbornly high, weighing on markets.

Since October Consumer Price Index Report showed a cooling in inflation, a wholesale price indicator showed inflation rising more than expected last month. The labor market also remains resilient, putting pressure on prices: employers added 263,000 jobs in November – more than expected by economists.

The yield on the two-year U.S. Treasury, which closely tracks expectations for Fed rate moves, fell sharply on Tuesday as investors lowered expectations for further interest rate hikes. As the Fed continued its rate hike campaign to bring inflation down, the yield on the two-year bond rose well above the 10-year equivalent, a rare but reliable sign of a recession.

Wednesday’s inflation report and Fed meeting will “undoubtedly set the tone for financial markets heading into next year,” Deutsche Bank economists wrote in a research note.

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