US consumer prices rose 0.4% in November which was in line with consensus expectations and the year-on-year rate increased to 2.2% from 2.0%.
Core prices, however, rose 0.1% compared with consensus expectations of 0.2% and the year-on-year rate declined to 1.7% from 1.8%.
The subdued core increase dampened expectations of a more aggressive Fed tightening stance. Treasuries rallied and the dollar dipped lower with USD/JPY at 113.00 from 113.30.
Fed statement will now be crucial with a 0.25% rate hike priced in. Rhetoric on inflation and financial conditions will be very important with the updated Fed Funds projections also a key element.
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