November CPI Out Today as Fed Meets; Where to Move Money (If You Expect Rate Cuts)

November CPI Out Today as Fed Meets; Where to Move Money (If You Expect Rate Cuts) By James Christie

Good day. The November consumer-price index report will be released today just as Federal Reserve officials settle in for their two-day policy meeting. Economists polled by The Wall Street Journal expect the CPI to be unchanged compared with October and up 3% from a year earlier. Fed officials are increasingly confident they won't need to raise interest rates more to defeat inflation-but neither have they said they are done raising rates. Officials remain wary of declaring premature victory given that inflation has previously appeared to be sliding toward their 2% target, only to rekindle. Meanwhile, the Fed's rate-rise campaign has pushed returns on money-market funds and similar securities higher, with investors grabbing an easy, guaranteed 5% annual return. Taking on more risk might be the move, as stocks and bonds tend to perform better in a pause before rate cuts than after, according to an analysis from BlackRock. More on that below.

Now on to today's news and analysis.

Top News What to Watch in the CPI Report

Lower prices for gasoline, cars and furniture likely cooled inflation last month, but underlying price pressures have remained more stubborn, analysts estimate.

Economists surveyed by The Wall Street Journal estimate consumer prices overall were unchanged in November compared with the prior month and rose 3% from a year earlier. That would be the same as October's flat monthly reading and a slowdown from that month's 3.2% yearly increase. So-called core prices, which exclude volatile food and energy items, likely rose 0.3% in November from the prior month and 4% from a year earlier, they estimate. That monthly gain would be a slight acceleration and consistent with that month's annual reading.

U.S. Economy Money Moves to Make If You Expect the Fed to Lower Interest Rates

While there is no guarantee the Federal Reserve is done raising interest rates or will cut them soon, history suggests it pays to make investment moves now, before a possible first rate cut .

U.S. Companies Are Finding It Hard to Avoid China

Trade data, corporate announcements and new academic research show that a large portion of the products shipped to the U.S. from places such as Southeast Asia and Mexico are being made in factories owned by Chinese companies .

New York Joins IBM, Micron in $10 Billion Chip Research Complex

New York state is joining chip companies to invest $10 billion in a semiconductor research facility near the University at Albany that is set to bring advanced chip-making equipment to the state.

The American Store Is Shrinking

The average store size in the U.S. is the smallest it's been in at least 17 years , as the rise in e-commerce and a growing distaste for giant emporiums has softened demand for department stores and other big-box space.

Key Developments Around the World Australia Not Falling Behind in Fight to Tame Inflation

Australia isn't falling behind other countries in the fight against inflation, RBA Gov. Michele Bullock said, adding that the central bank was taking a "more cautious" approach to tightening to preserve recent gains in the job market.

Australian Consumer Sentiment Improves But Still Weak

Alarm Grows Over Weakened Militaries and Empty Arsenals in Europe

There is no immediate military danger to Europe from Russia, but if Russia ultimately wins in Ukraine, few doubt Moscow's capacity to rearm completely within three to four years and cause trouble elsewhere.

Zelensky Faces a Turning Point as He Heads to Washington

At COP28, Hopes Dim for Fossil Fuel Phaseout

Countries pushing for a U.N. agreement to phase out fossil fuels saw their hopes dim Monday as United Arab Emirates officials who are leading talks dropped the idea in the final stretch of the climate conference here.

Forward Guidance Tuesday (all times ET)

Time N/A: FOMC Meeting

8:30 a.m.: U.S. consumer-price index for November

Wednesday

Time N/A: FOMC Meeting

2 a.m.: U.K. industrial production and gross-domestic product estimate for October

5 a.m.: EU industrial production for October

8:30 a.m.: U.S. producer-price index for November

2 p.m.: Federal Reserve interest rate decision and economic projections

2:30 p.m.: FOMC press conference on interest-rate decision and economic projections

Research Fed's Dot Plots Awaited Amid Market Repricing of Rate Expectations

Key for markets at the Federal Reserve's upcoming meeting will be the updated dot plots--Federal Open Market Committee members' interest-rate forecasts--and economic projections, which come amid a major dovish repricing of rate expectations in recent weeks, says Jamie Dutta, market analyst at online broker Vantage. The sharp fall in U.S. Treasury yields has caused an easing in financial conditions, which is undoing some of the Fed's previous interest-rate hikes, he says. "This seems too early for officials and so a push back is widely predicted," he says, expecting this to be done with continued reference to strong growth and a still solid labor market. "The Fed is not talking about policy easing any time soon," Dutta says.

-Emese Bartha

Fed Seen Starting Rate Cuts in Third Quarter of Next Year

The Federal Reserve's first interest rate cut will likely come in the third quarter of 2024, Goldman Sachs economists write in a note, moving up their previous forecast by one quarter. It compares with market expectations as measured by fed-funds futures that price an initial cut in May. The economists say cooling inflation data could provide the necessary conditions for monetary easing sooner than previously expected, while sticky labor costs are expected to remain a hurdle. Updated FOMC forecasts due Wednesday "should reflect the better inflation news and the continued resilience of the economy and labor market," the economists write.

-Paulo Trevisani

ECB to Focus on Balance Sheet Rundown

The European Central Bank's coming meeting will focus on the discussion surrounding quantitative tightening and running down its balance sheet, as well as how much to push back on interest-rate cuts currently priced into the market, David Zahn, head of European fixed-income at Franklin Templeton, writes in a note. "The ECB should announce a plan to wind down the balance sheet given it would seem a strange policy approach to announce QT as they announce rate cuts at a meeting next year," he writes. He adds the rate cuts currently priced in the market for 2024 seem excessive given the macro backdrop in the eurozone economy with slow-to-flat growth and inflation still above target.

-Emese Bartha

Commentary What India Needs to Ditch Coal

India debuted sovereign green bonds this year totaling about $2 billion, a minuscule amount considering it would need $1.4 trillion to go carbon-neutral by 2070, at an average of $28 billion a year , Megha Mandavia writes.

A Spot Bitcoin ETF Is Easy. What Comes Next Could Get Dangerous.

Giving fund managers easier access to bitcoin is already a contentious topic for regulators, but that is nothing next to the Pandora's box that could be opened with its crypto peer ether , Jon Sindreu writes.

Basis Points The U.S. jobs market slowed again in November , cooling a little but remaining relatively robust. The Conference Board's Employment Trends Index fell to 113.05 from a downwardly revised 113.09 in October. The index has been falling steadily since reaching a peak in spring last year. U.S. mortgage rates falling from a 23-year high have brought some early holiday cheer for home shoppers and sellers, as a Zillow market report for November shows monthly costs for a new mortgage are falling, inventory is trending back toward normal, and price cuts are uncharacteristically common. Buyers received a bit of relief as monthly mortgage costs on a typical home purchase fell 1.5% from October, and affordability improved, with mortgage payments, as a share of household income, falling from October's record high of 40.4% to 38.6%. (Dow Jones Newswires) The average house price in the U.K. fell 1.9% in the month to Dec. 2 , the largest fall for this period for more than 20 years, according to new data from Rightmove. The average price of property coming to the market fell on month to 355,177 pounds ($447,345), a bigger fall than the usual seasonal slip of 1.5%, the online property portal said Monday. U.K. wage growth cooled in the three months to October while the unemployment rate held steady, providing some encouragement for the Bank of England ahead of its final meeting of the year later this week, data from the Office for National Statistics published on Tuesday show. Germany's economic outlook improved unexpectedly in December, reflecting improving expectations for earlier interest rate cuts alongside declining inflation, according to a monthly survey published Tuesday. Feedback Loop

This newsletter is compiled by James Christie in San Francisco.

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This article is a text version of a Wall Street Journal newsletter published earlier today.

(END) Dow Jones Newswires

12-12-23 0715ET