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US inflation is slowing down: is it time for a FED pivot?

ByFederica Montella
Published 13/01/2023, 11:52

US stock rose on Thursday

Yesterday has been the third positive day for Wall Street.

All three major indexes have closed in profit.

The S&P 500 closed at +0.34%, the Nasdaq and the Dow Jones both ended the trading session at +0.64%.

Investors have celebrated the slowdown of inflation.

Inflation is slowing down: is it time for a Fed pivot?

On Thursday, the Department of Labor released its annual consumer price growth for the month of December.

In the US, the inflation for the last month of 2022 was at 6.5% exactly as forecasted by economists.

The CPI has slowed down from 7.1% in November.

With the latest inflation data, investors are now expecting a less aggressive interest rate hike by the Federal Reserve at the next meeting.

Investors are now talking about a potential pivot despite the Federal reserve members' speech that have said multiple times that interest rates, most probably, are not going down until 2024.

The US central bank lifted rates by 50 basis points following four consecutive rate hikes of 75 basis points.

At the moment, the majority of the investors are expecting a 0,25% rate increase at the next Federal reserve meeting.

The chart below shows real-time data.

FedWatch Tool - FED rates probabilities

92.7% of investors are expecting the FED to increase the interest rates by 0.25% at the next meeting.

The remaining 7.3% are expecting a 0.50% rate increase.

The number of investors expecting a rate increase of 0.25% has drastically increased after the positive CPI data.

No other options are considered at this time.

The next FED meeting is on 1 February 2023.

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