Via ZeroHedge:
...Bloomberg Economics Anna Wong
“December’s CPI report offers a third straight month of good news on inflation, with outright deflation in the headline measure. Momentum points to underlying headline CPI running at a pace close to the Fed’s 2% price target, though core CPI is still in the 3%-4% range because of sturdy core-services readings.
“While the mostly favorable report gives the Fed scope to further slow the pace of rate hike to 25 basis points at its upcoming meeting, officials are likely to conclude they still have work to do. Bloomberg Economics expects the Fed funds rate to reach 5% in March and stay there for the remainder of the year.”
Omair Sharif, founder of Inflation Insights:
“The broader message is that we now have a 3m SAAR core CPI rate of 3.1% vs 6.0% in Sept. And a 6m SAAR of 4.55% vs 6.9% in Sept. We still clearly have moderation in the core, and the idea that we’d see a string of lower core CPI prints starting with the October report, something I’ve been discussing since September, remains intact.”
TD’s Priya Misra:
“Even though headline MoM CPI was negative and YoY CPI is declining, core CPI came at consensus and the strength in core service CPI brings up the pain trade for markets. A 50bp hike in Feb looks more likely -- that is our call. A sticky inflation trajectory will also make it difficult for the Fed to cut rates once the economy enters a recession. They are already reluctant to cut early because of the concern of a mis-step like the easing in 1970s. This is a huge negative for risk assets.... The market’s a little too optimistic, extrapolating that this decline in service inflation will continue. Historically, service inflation is very sticky on the way down.”
CIBC economist Katherine Judge:
"The data argue for going by 50 in three weeks. With shelter costs set to soften, and the impact of past interest rate hikes materializing more, the Fed will likely be able to pause after a final 50 basis-point hike at the next FOMC.”
Morgan Stanley economist Ellen Zentner
“This month's report provides confirmation that the downshift in inflation pressures is becoming entrenched, setting the stage for another reduction in the pace of rate hikes at the upcoming February FOMC. Fed speakers have signaled to a preference for a step down to 25bp increments as the end of the tightening cycle comes closer. While the December FOMC's SEP points to a higher peak rate, we continue to expect only one final 25bp rate hike before a pause and an eventual first rate cut in December. The inflation data look consistent with our call, and more slowing in the two payrolls reports between now and the March meeting should move the Fed to an earlier end of tightening.”
Andrew Patterson, senior economist at Vanguard
"It will be all the more important to monitor Fed officials’ communication for a steer on what they will decide Feb. 1. We will be paying close attention to Fed communications going forward as we assess the likelihood of 25 v 50 basis points for the Jan/Feb FOMC meeting.”....
....MORE, including introduction and comments on shelter
