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US inflation continues to fall

This does not firmly indicate whether the Fed will hike by 25 or 50 bps next month

12 January 2023

It has been widely documented that the December CPI report for the US would be the decider for interest rate policy from the Federal Reserve (Fed) in its upcoming meeting next month. The surprise was there was no real surprise with the monthly change coming in line with estimates, showing a CPI decrease over the month of 0.1%. Year-on-year CPI now stands at 6.5%, again in line with expectations. The encouraging message is that inflation is continuing to fall and dropping quite quickly from the peak it hit in the middle of 2022 when it hit 9.1% but this does not firmly indicate whether the Fed will hike by 25 or 50 bps next month but were I to make a prediction one way or the other, I would expect 25 bps as the Fed shifts to a slower, but more persistent, hawkish stance.

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Charles Hepworth

Investment Director
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