That led analysts to nudge down forecasts for the core personal consumption expenditure (PCE) inflation measure to a benign 0.2% for December. That would see the annual pace slow to under 3% for the first time since March 20221 and leave the six-month annualised rate at the Fed’s target of 2.0%.
Markets are more than fully priced for the ECB to cut in April, even though its chief economist over the weekend flagged June as a more likely window.
There’s a chorus line of ECB speakers at the Davos meeting this week, including President Lagarde on Wednesday, who will likely push back against pricing of an April move, and just as likely be ignored by markets.
Fed speakers this week include the always-influential New York Fed boss Williams, but perhaps more telling will be Governor Waller on Tuesday, given he will be addressing the economic outlook and is assumed to be close to Chair Powell in thinking.
What he says about the clear downward trajectory of the core PCE measure should make for interesting reading.
One risk to the good news story on inflation is the disruption to shipping in the Red Sea, with the U.S. military reporting on Sunday it had downed a Houthi cruise missile attack on its ships.
Analysts estimate 12% of world trade and 30% of container traffic typically goes through the Red Sea, but transits have dropped 35-45% in the past month and it takes an extra 15 days for ships to take the alternate route around the Cape of Good Hope.
S&P reports shipping rates have increased to more than $4,500 per forty-foot container on Asia-to-Europe lanes, from one-third of that level in October.
/cloudfront-us-east-2.images.arcpublishing.com/reuters/2IYFUUQJ4FLOLF3QX62R4EVTVY.jpg "Markets weather Beijing's displeasure on Taiwan 40")
