The economic landscape of the United States is poised for a crucial moment as it approaches the release of the Consumer Price Index (CPI) data for November.This announcement is scheduled for December 11,2023,at 9:30 PM Beijing time,just days before the Federal Reserve's highly anticipated policy meeting on December 17 and 18.Economists and financial analysts are looking closely at this data,which is expected to be a key reference point for future interest rate decisions.

Current expectations are that the year-on-year change in CPI will rise from 2.6% in October to 2.7% in November.This anticipated increase signals a potential upward trend in prices,with month-on-month CPI growth projected to advance from a modest 0.2% to a slightly higher 0.3%.When excluding volatile categories such as food and energy,the core CPI is expected to remain steady,hovering around 3.3% year-on-year and 0.3% month-on-month.This scenario is particularly significant as it underscores the persistent inflation that has remained above the Federal Reserve's target of 2% for six consecutive months.

Market sentiment is incredibly sensitive to these figures.Analysts predict that a CPI result that falls below expectations could heighten the probability of a rate cut in December,further exerting downward pressure on the dollar.Conversely,if the inflation data comes in stronger than anticipated,it may temper investor expectations regarding the depth of future rate cuts projected for 2025 and could,therefore,bolster the dollar's strength.

The rate of inflation appears to be slowing,but at a gradual pace.Josh Hurt,a senior American economist,suggests that the inflation data for November is unlikely to present significant changes compared to October’s figures.The overall inflation level remains locked within a 2.5% to 3.0% range.This moderation in inflation growth arises partly from a base effect,with last year's inflation figures being relatively weak.Additionally,rising costs in the service and housing sectors continue to put upward pressure on overall prices.Hurt anticipates a core CPI month-on-month increase of approximately 0.25% for November.

The inflation prediction model from the Cleveland Fed aligns with market expectations,suggesting a month-on-month overall inflation growth rate of 0.26% and a year-on-year rate of 2.7%,similarly forecasting the core CPI's month-on-month growth at roughly 0.27% and 3.3% annually.Housing inflation has previously been a vital driver of overall inflation,and it is expected to remain elevated in November.Recently strong wage growth may also contribute to persistent inflation in service sectors,leading to concerns that it may be challenging to stabilize service-related inflation around the targeted 2% level if wage increases maintain their recent momentum.

Goldman Sachs analysts released a CPI outlook report predicting a core CPI month-on-month increase of 0.28%.They note that price increases in categories such as used cars,airline tickets,clothing,and auto insurance contribute to inflationary pressures.Although the increase in used car prices is anticipated to moderate from 2.7% in October to around 2.0% in November,this segment remains robust with auction prices continuing to rise,affecting the retail market.

Housing forms a critical component of CPI calculations,with Goldman Sachs estimating that Owners' Equivalent Rent (OER) will see a month-on-month rise of 0.33% in November,slightly down from 0.40% in October,while rent is projected to remain stable with a 0.28% increase.Over the coming months,Goldman expects CPI's month-on-month growth to fluctuate within the 0.20% to 0.25% range,forecasting an inflation rebound in January 2025 due to seasonal factors.

Furthermore,Wells Fargo economists have expressed that,despite signs of inflation cooling over the past few months,risks of rising inflation persist throughout 2025.Achieving the Federal Reserve's 2% inflation target appears increasingly challenging.

Recent survey data from the New York Fed reflects an uptick in consumer inflation expectations,with one-year projections rising to 3%,compared to 2.9% in October.Expectations for three-year inflation also increased to 2.6%,up from 2.5%,and five-year expectations climbed to 2.9% from 2.8%.This upward trajectory in consumer perceptions of inflation over various time frames indicates growing concerns about sustained price increases.

The market anticipates significant changes in the Fed's interest rate trajectory.Current swap markets are indicating an over 80% probability of a 25 basis point rate cut by the Fed's December meeting.However,many industry insiders contend that potential rate cuts next year may be limited to less than 50 basis points,diverging from the Fed’s September forecast of a median reduction of 100 basis points in 2025.

According to the CME's FedWatch tool,the market is currently estimating an 86% chance of the Fed implementing a 25 basis point cut,with a 14% likelihood of maintaining current rates.Analysts suggest that while short-term economic cooling will likely support further rate cuts,resilient wage inflation and escalating consumer inflation expectations,alongside fears of re-inflation post-election,may restrict the scope for mid to long-term rate reductions.

Matthew Weller,Global Research Director at Gain Capital,affirmed that the Federal Reserve's primary focus remains on maintaining full employment and stable inflation.Following a steep decline in inflation throughout 2022 and 2023,the overall rate seems to have stabilized around 3%.Recently,Fed officials have voiced potential for additional rate cuts in December,but this outlook is not yet firmly established.

Should tonight's CPI data significantly surpass expectations,it could lead to a reassessment of the Fed's rate cut plans for the month.Morgan Stanley argues that regardless of CPI outcomes,they firmly expect a 25 basis point rate cut to transpire in December.They also posit that November's CPI release may be one of the least impactful data points for the market this year,suggesting that only extremely positive or negative shifts in the data could compel the Fed to alter its predetermined strategy.

The market is in a phase of cautious anticipation.Mona Mahajan,Investment Strategy Chief at Edward Jones,noted that prior to the release of this week’s CPI and PPI data,traders are adopting a wait-and-see approach,hoping to see figures that won’t significantly disrupt next week’s Fed decision.

The stock market's reaction could be influential.According to calculations by Lee Cooper-Smith,head of derivatives sales at Goldman,should the core CPI month-on-month increase exceed 0.4%,the S&P 500 could witness a decline of approximately 1.2%.A core CPI growth ranging between 0.35% to 0.39% might reduce the index by 0.5%,while a rate ranging from 0.31% to 0.34% could result in a modest 0.2% dip.Meanwhile,a core CPI increase between 0.26% and 0.3% could buoy the index by 0.4%,and should the growth fall below 0.15%,the S&P 500 might see gains exceeding 1%.

Analyst predictions are clear; if CPI data comes in lower than expected,the market may hint at a leaning towards a more dovish Fed stance,likely lifting gold prices.Conversely,better-than-expected CPI results could generate greater uncertainty regarding future rate cuts by the Fed,exerting downward pressure on gold prices.