Ahead Today
G3: US FOMC, US PPI
Asia:South Korea Unemployment Rate
Market Highlights
US headline core CPI came in a whisker above expectations at 0.1% mom for November, with the core rate in line with consensus at 0.3% mom, and up from 0.2% mom previously. The details showed that used car prices, shelter and healthcare contributing to the rise in core inflation. Some of these price increases should fade over the coming months reflecting the moderation in used car auction prices and rentals are already in the pipeline.
Overall, markets retraced some but not all of the better risk sentiment after the CPI print, with the Dollar still weakening on the day by 0.2%, US 10-year yields down to 4.2%, while S&P500 up 0.5%.
The big event today is the FOMC meeting, where we expect the Fed to keep rates on hold. Beyond the actual decision, markets will also watch closely at the Summary of Economic Projections, together with Chair Powell’s press conference. Overall, Chair Powell will likely want to maintain optionality moving into 2024, and is as such likely to keep a hawkish tone still. The dot plots could maintain 2 rate cuts for 2024, keep the long-term neutral rate unchanged for now, while also lowering the inflation projections slightly for both 2023 and 2024.
Regional FX
China’s top leadership completed the annual Central Economic Work Conference (CEWC), on the back of the December Politburo meeting. The readout showed a focus on long-term structural reforms and somewhat less so on short-term large-scale demand stimulus, with development of strategic emerging sectors and technology upgrading a key policy focus for 2024. Nonetheless, there were some signals of demand-side boosts such as consumption subsidies, tax cuts, enabling the flow of credit to property developers, while also ensuring employment for key groups. The Politburo readout also placed an emphasis on stepping up fiscal support. India’s headline inflation picked up to 5.6%yoy, but this was lower than consensus forecasts for a 5.8%yoy rise. The increase was driven largely by volatile food and vegetable prices, with core inflation coming down further to 4.1%yoy, and helped in part by previous LPG price cuts and government measures to manage the domestic supply of food. Meanwhile, India’s industrial production picked up further in October, led by a rise in capital goods and consumer durables spending. The Philippines’ trade deficit rose by more than expected to US$4.1bn, led by sharp drop in export growth.
