Chances of Fed rate cut rise despite higher November inflation report

foxbusiness.com:

Professional Capital Management CEO and founder Anthony Pompliano analyzes whether to buy bitcoin, the de-banking debate and latest developments in the UnitedHealthcare CEOs fatal shooting.

Inflation edged slightly higher in November, but that hasn't dimmed the market's expectations that the Federal Reserve will cut interest rates when policymakers meet next week.

The consumer price index (CPI) ticked up last month, rising to 2.7% on an annual basis from 2.6% in October. The rise was in line with the estimates of economists polled by LSEG, but it moves the headline inflation figure further from the Fed's target rate of 2% – though it remains well below the 9.1% peak of this inflationary cycle in June 2022, which was the highest in four decades.

Despite the rise in inflation, the probability of a 25 basis point rate cut at next week's meeting increased from 88.9% on Tuesday to 94.7% as of Wednesday afternoon, according to the CME FedWatch tool. 

«The increase in the inflation rate (2.7% vs 2.6%) won't be enough to spoil Christmas – the Fed is going to cut rates another 25bps next week and that should enable markets to rally into year end,» said Chris Zaccarelli, chief investment officer for Northlight Asset Management.

INFLATION RISES 2.7% IN NOVEMBER, IN LINE WITH EXPECTATIONS

Markets expect the Fed to cut interest rates next week. (Mandel Ngan/AFP via / Getty Images)

«The headline CPI was consistently above 3% in the beginning of the year and now it is consistently below 3%, so despite the fact that the series is a little noisy from month-to-month, we believe the Fed is likely to look through these fluctuations and continue on their easing path,» Zaccarelli added.

The Fed kicked off the current rate-cutting cycle with