The US Consumer price inflation for December rose by less than expected. This positive development halted a steep decline in bond prices and rekindled hopes that the fed may lower rates sooner than expected.
The so-called core consumer price inflation, which does not include energy and food prices, rose 0.2 per cent following four consecutive months of 0.3 per cent increases. That marked the first stepdown in the rate in six months. Cheaper hotel stays, a smaller advance in medical care services and relatively tame rent increases helped restrain the December figure.
Fed rate cut path
Easing inflation helps re-establish the discourse that progress in price pressures has restarted after months of higher prints. However, fed members will still need a string of modest readings to be convinced. There has been a significant surge in bond yields due to persistent inflation and worries that the fed eased too hastily late last year.
Policymakers are still anticipated to keep rates steady at their meeting later this month. That is largely due to last week's good jobs data and other factors. However, according to several analysts, the news opens the door to a possible fed rate cut in March. Before the inflation data, traders were expecting a further cut only in the second half of the year.