U.S. inflation data released on Thursday showed a surprising decline, signaling the potential for ongoing Federal Reserve rate cuts in the coming year. The Consumer Price Index (CPI) for November registered a 2.7% increase year-over-year, according to a report from the Bureau of Labor Statistics. This figure was notably below economists’ expectations, which had projected a rise of 3.1%. The previous CPI reading stood at 3%.
Core CPI, which excludes volatile categories such as food and energy, rose by 2.6%, significantly undercutting forecasts that anticipated a 3% increase. However, monthly inflation data was not included in this report, as the Bureau continues to deal with the aftereffects of the October government shutdown.
In response to the inflation numbers, financial markets reacted rapidly. Bitcoin saw a modest uptick, increasing by approximately 0.5% to trade just above $88,000. U.S. stock index futures also experienced gains, with the Nasdaq 100 advancing by 1.15%. The 10-year Treasury yield saw a slight decrease, falling two basis points to 4.12%.
Prior to this data release, markets were pricing in a 73% chance that the Federal Reserve would maintain interest rates at their current levels during the upcoming January meeting, as indicated by the CME FedWatch tool. However, the softer-than-expected inflation figures could prompt a reassessment of this outlook. For the time being, this shift in sentiment has contributed to a rise in risk assets, including cryptocurrencies, as investors anticipate a more accommodative monetary policy in the near future.
