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US bonds to its lowest level.

US bonds

US stocks and government bonds surged after consumer price inflation fell more than expected in November to its lowest level in almost a year, bolstering the Federal Reserve’s plans to slow the pace of interest rate rises.
The rate of increase in the consumer price index fell to 7.1 per cent last month, lower than the 7.3 per cent forecast by economists and down from 7.7 per cent in October. It was the lowest level since December 2021.
Overall CPI rose 0.1 per cent from the previous month, less than the 0.4 per cent increase in October.
«We could see setbacks along the way. But what is clear is my economic plan is working and we’re just getting started. My goal is simple: get price increases under control without choking off economic growth».
By late-morning trading, the S&P 500 was up 1.5 per cent and the Nasdaq Composite more than 2 per cent, as investors bet that the US central bank might not have to squeeze the economy as aggressively as feared to bring inflation under control. The yield on two-year US Treasury bonds, which is sensitive to changes in interest rate expectations, slid 0.22 percentage points to 4.18 per cent at one point, as the price increased. The Fed is set to raise its benchmark policy rate by half a percentage point today, breaking successive 0.75-point interest rate increases.
With the expected rise, the federal funds rate will move up to a new target range of 4.25 to 4.5 per cent, which most officials believe is still not high enough to bring inflation down to the Fed’s longstanding 2 per cent target.
«One number won’t be enough for the Fed, but it certainly is going to put in a better mood,» said Padhraic Garvey, regional head of research for the Americas at ING.

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  1. Anonymous14 December 2022 at 16:56

    I also think the US central bank may not have to squeeze the economy as hard as it was feared. The US economy is strong and it might return to its former glory earlier (and stronger) than expected.

    ReplyDelete

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