Instant View: U.S. consumer prices fall in December

NEW YORK, Jan 12 (Reuters) – U.S client costs unexpectedly fell for the primary time in additional than 2-1/2 years in December amid declining costs for gasoline and different items, suggesting that inflation was now on a sustained downward development.

The buyer worth index dipped 0.1% final month after gaining 0.1% in November, the Labor Division mentioned on Thursday. That was the primary decline within the CPI since Could 2020, when the economic system was reeling from the primary wave of COVID-19 infections.

Economists polled by Reuters had forecast the CPI unchanged.

MARKET REACTION:

STOCKS: U.S. inventory index futures fall after the inflation dataBONDS: U.S. Treasury yields slid throughout the board.FOREX: The greenback fell towards the euro and yen.

COMMENTS:

PHIL BLANCATO, CHIEF EXECUTIVE OFFICER, LADENBURG THALMANN ASSET MANAGEMENT, NEW YORK

“This for my part precisely what we needed, not too scorching, not too chilly, a Goldilocks quantity that may set us up for a much-improved 12 months this 12 months.

Preliminary response is minimal, once you meet expectations, that tends to be that you’re not going to get a major vibration out there”

It might not shock me to see markets fell off a bit immediately with the expectations of a lower-than-expected quantity, which clearly didn’t occur.”

BRIAN MULBERRY, CLIENT PORTFOLIO MANAGER, ZACKS INVESTMENT MANAGEMENT, CHICAGO

“Prime line numbers fell proper consistent with expectations for each CPI and Core CPI, which can verify the market’s notion that Inflation has peaked and that we are going to doubtless not retest the excessive of 9%+.

That mentioned, the jobless claims got here in under expectations by sufficient of a margin to verify the Fed’s place that robust labor markets are inclined to gas extra spending in Companies.”

Backside line, this doesn’t transfer our perception that we are going to see charges transfer increased nonetheless and sure stay at or above 5% for nearly all of 2023.”

MARIA VASSALOU, CO-CHIEF INVESTMENT OFFICER OF MULTI-ASSET SOLUTIONS, GOLDMAN SACHS ASSET MANAGEMENT, NEW YORK

“The market has priced in a really optimistic state of affairs about CPI within the earlier days. The numbers got here in at precisely the expectations degree. That implies that a few of the optimism within the markets could get unwound each in equities and glued revenue. Whereas a 25-bps hike within the subsequent Fed assembly continues to be in play, the power of housing within the core CPI and the benign jobless claims assist the state of affairs of a 50bps hike within the subsequent assembly. Nevertheless, what issues most for the markets is the terminal Fed charge, not a lot the tempo of hikes. As we get nearer to the terminal charge, the tempo of hikes must decelerate.”

QUINCY KROSBY, CHIEF GLOBAL STRATEGIST, LPL FINANCIAL, CHARLOTTE, NORTH CAROLINA

“That is troublesome for the (inventory) market. The market had been anticipating a cooler quantity, particularly having these rents which can be beginning to come down present up a bit bit on this report, however they have not. The market has been determined to cross over 4,000 into 4,100; that is going to make that troublesome.”

IAN LYNGEN, HEAD OF U.S. RATES STRATEGY, BMO CAPITAL MARKETS, NEW YORK

“I believe that the as anticipated headline and core CPI print have actually contributed to the notion that the Fed shall be downshifting once more, whether or not it is at February or on the March assembly stays to be seen, and we’ll be watching the incoming Fed converse for any steering all through the day in that regard.

The truth that we’ve seen core inflation decelerate to five.7% year-over-year, from 6% in November, reinforces the height inflation argument. Equally on the headline foundation we dropped to six.5% from 7.1%. All of that is according to the Fed’s interpretation of the lagged impression of financial coverage and the cumulative impact of the tightening that they’ve already completed.

So, the dialog for the market is shortly going to shift to how lengthy will the Fed really be capable to maintain terminal in place as soon as its achieved, and I believe that that is what’s enjoying out within the Treasury market at this second, and we’re seeing a internet decline in charges just about throughout the curve. However I’ll word that it’s an particularly risky interval, which isn’t atypical for inflection factors in market expectations and the broader macro outlook.”

BRIAN KLIMKE, INVESTMENT DIRECTOR, CETERA INVESTMENT MANAGEMENT LLC, LOS ANGELES

“It (the report) got here in as anticipated, however traders had been considerably optimistic main into this studying, in order that they had been shopping for the rumor and promoting the brand new. They had been form of anticipating (an) as-expected or higher than anticipated studying. In order that they had been bidding up markets forward of time and now that the information hit, they’re promoting. We have seen that earlier than the place traders anticipate after which as soon as the information is in, they promote a bit bit.”

Compiled by the World Finance & Markets Breaking Information group

Our Requirements: The Thomson Reuters Belief Ideas.