Traders don't seem to think that the latest inflation report will come in hot on Tuesday morning, and neither do economists. The Consumer Price Index is expected to cool off again in November, falling for a fifth straight month to a pace of 7.3% Y/Y, and down from a record 9.1% notched back in June. Equities climbed Monday on expectations that a softer CPI will permit the Fed to slow down the pace of its aggressive rate hikes (vote in our Wall Street Breakfast poll here).
If history is any guide: Out of the ten monthly CPI readings published for 2022, only one of them hit expectations (February's 7.9%). Eight of the other headline figures came in hotter than anticipated, while two of them were lower than consensus estimates. There were no major surprises, however, with the spread between actual prints and their forecasts reaching a maximum of 0.3%.
Keep another eye on core CPI data, which strips out volatile food and energy prices. That figure has been bouncing around more this year - with another high of 6.6% recorded just two months ago - and could be key to gauge if pressures are seeping into more parts of the economy. Notable categories to watch include rent and shelter costs, public transportation, medical services and college tuition.
Commentary: "The CPI report will likely confirm the slowdown in core inflation that was observed last month," noted UBS economist Jonathan Pingle. "Contrary to what happened earlier this year when we got a few low inflation prints, we are not seeing high-frequency and front-month leading indicator data suggesting an inflation rebound. The move lower in inflation seems to be more persistent this time around."