The S&P 500 has inched higher this week and if the index closes up for another day, it would mark the longest winning run since 2004.

Recurring applications for US unemployment benefits rose for a seventh straight week, adding to

evidence that the labor market is cooling

.

Federal Reserve Chair Jerome Powell said the US central bank won’t hesitate to tighten policy further if appropriate and reiterated that the central bank isn’t fully confident that it has tightened enough to return inflation to 2%.

Stock futures rose and bond yields fell, with

traders looking past the Federal Reserve’s efforts

to downplay the market’s dovish bid ahead of a key reading on consumer sentiment.

All I Want for Christmas Is My 2% Inflation. 🎄

Consumer prices lower than expected across the board.

Key: 블룸버그에 추정치를 제공한 65개의 하우스 중 오직 8개 하우스만 핵심 물가 지표의 전월 대비 증가가 +0.2%에 그칠 것으로 예상했음.

Only 8 among 65 forecasters in Bloomberg’s survey anticipated a 0.2% core monthly CPI increase.

Horizon: 미국 중앙은행이 원하는 물가 목표치에서 여전히 멀지만, 핵심 물가 지표가 전년 대비 4% 증가에 그친 것은 2021년 9월 이후 가장 적은 증가율임.

The 4% year-on-year increase in core prices is the smallest since September 2021. We are still quite some ways from the Fed’s target, but there’s at least some incremental progress.

Rates: 물가 지표 이후 금리시장의 가격 반응은 i) 중앙은행의 금리인상 주기가 막을 내렸으며, ii) 내년 금리인하 폭을 100bp(4회)에 가깝게 책정하고 있음.

The rate market is signaling that the tightening cycle has effectively ended, with the OIS market pricing in a mere 12% chance of a hike by January. Meanwhile, they’ve priced in rate cuts of about 92 bps by December 2024.

On a monthly basis, energy costs and core goods provided some disinflationary pressure for the first time since May, and service inflation eased from the prior month.

Implication: 중앙은행의 정책금리에 현재의 물가 추세를 대입하면 실질 정책금리는 1.50%가 됨. 만일 이대로 물가가 지속 하락 할 경우 중앙은행은 실질 정책금리가 너무 높은 것을 상쇄하기 위해 금리인하를 해야 한다는 사실에 시장 참여자들은 베팅 중인 것임.

With inflation falling, the real fed funds rate is tightening. Using Core CPI at 4%, the inflation-adjusted policy rate is at about 1.5%. Should inflation continue to cool next year, the Fed may need to bring the rate down to offset the tightening of the real rate. That’s what the market is betting on.

“The CPI print suggests ‘higher for longer’ might not be as long as some feared.”

UK inflation tumbled to the lowest level in two years, prompting investors to firm up bets that the Bank of England will be able to cut rates as early as the Spring of next year.