Morgan Stanley anticipates the upcoming US Consumer Price Index (CPI) data, due on Thursday, 18 December, will confirm persistent inflationary pressures, despite limited monthly detail caused by recent government disruptions.
The bank expects core CPI inflation to remain steady, driven by a rebound in shelter costs and resilient goods prices. They estimate core CPI rose by approximately 0.28% month-on-month across October and November, which would put the year-on-year core inflation rate at about 3.0% in November. Headline inflation is similarly expected to stay elevated, averaging around 0.26% month-on-month during the same period. These figures suggest ongoing inflation momentum far from the Federal Reserve’s 2% target.
However, due to the government shutdown, the October and November monthly CPI figures will not be released individually. Instead, only an aggregated November price level will be available, limiting transparency around month-to-month changes and reducing the granularity traders usually rely on for market moves. Despite this, Morgan Stanley believes the overall signal still indicates firm underlying inflation pressures.
Shelter inflation, which had shown signs of moderation, is expected to pick up again. This reflects the usual lag between rental market trends and official inflation measures. Similarly, goods prices, which had previously helped slow inflation, are forecast to remain sturdy, implying inflationary pressures extend beyond services to goods as well.
Morgan Stanley cautions that the restricted detail may temper immediate market reactions but overall, the data are likely to reinforce a cautious Federal Reserve policy stance. With core inflation around 3%, it is unlikely that policymakers will feel confident enough to hint at an imminent easing through rate cuts. Instead, the central bank is expected to maintain a restrictive monetary stance well into early 2026.
Meanwhile, the Wall Street Journal has published its survey of market expectations, summarised by their Fed expert Nick Timiraos, providing additional context for traders monitoring inflation trends and the Fed’s response.
Original Source: Eamonn Sheridan of investinglive.com
