With the release of preliminary data, expectations for December 2024, the last Federal Reserve interest rate meeting in 2024, have begun to change. It has to be clear.

On December 11, Eastern Time, the United States released the latest CPI data for November 2024. Its overall inflation Things have picked up, and core inflation has been relatively stable. On December 6, the U.S. Department of Labor released U.S. non-agricultural employment data for November, which showed that the U.S. unemployment rate increased slightly after the election. The combination of the two data has raised market expectations for a rate cut by the Federal Reserve in December.

As the results of the US election come to fruition, the impact of Trump's coming to power has begun to gradually affect the direction of the US market. Among them, the issue that has attracted more attention is whether it will conflict with the Federal Reserve's interest rate cutting cycle. How will recent U.S. economic data affect the December interest rate meeting? And what impact will Trump's decision have on subsequent interest rate discussions? This article will analyze this.

Core inflation has not The current rebound trend supports confidence in the decision to cut interest rates

The CPI in the United States in November increased by 2.7% year-on-year and 0.3% month-on-month; the core CPI increased by 3.3% year-on-year and 0.3% month-on-month. The year-on-year and month-on-month growth rates were basically the same as in October. After experiencing continuous declines in the inflation index from April to September, the inflation reported by the Federal Reserve rebounded for two consecutive months. Focusing on the details, its core inflation items have shown obvious stubbornness, but there is not much momentum for recovery.

Specifically, the United States will Inflation stickiness has been mainly composed of core services. "Accommodation and transportation" related expenses such as housing, medical care, education, insurance, transportation services, etc. are expenses that American residents or most residents need to face. These expenditures increased significantly during the epidemic, but they have not been effectively recovered after the epidemic.The decline constitutes the current stubborn inflation issue in the United States.

But looking only at November, the month-on-month changes in core services in the United States were mainly down, with rent and, Transportation services have all experienced a slight decline. Although school accommodation and hotel accommodation have rebounded significantly, their proportions and weights are already low, and their overall impact is relatively limited. The aviation service segment, which has experienced large fluctuations in the past two months, has also temporarily come to an end with the end of Boeing's strike.

On the other hand, the rebound in inflation in November is related to food and energy prices, and the two share their contribution to the growth rate of inflation Back on track, the energy item increased by 0.22pct month-on-month, while food prices increased by 0.23pct month-on-month. Considering the stabilization and cooling, and the seasonal impact of Christmas approaching, related fluctuations are normal.

Overall, the US inflation data in November did not get better, but they did not get worse either. Although the stickiness of the core inflation item remains solid, the rapid rebound in inflation that the market is worried about currently seems unlikely, which makes the market more confident in the Fed's decision to cut interest rates in December.

Good employment data Mixed, event disturbances gradually fade

In terms of employment data, the U.S. non-agricultural data in November can be described as "mixed " to describe. There were 22 new non-farm jobs added in November. million, higher than the expected 200,000, and the previous value was revised to 36,000; the overall unemployment rate was 4.2%, also higher than the previous value and the expected value of 4.1%; the overall labor force participation rate dropped to 62.5%, lower than expected 67.7% of the previous value and 62.6% of the previous value; the non-agricultural new growth rate was 4.0%, higher than the market expectation of 3.9%.

From the perspective of employment population, in November It can be said that the new non-agricultural employment has rebounded sharply, but the main reason is the "natural and man-made disasters" on the non-agricultural employment side of the United States in October. Continuous hurricanes in the United States in October andThe strike at Boeing Company significantly reduced the number of new jobs created, and the rebound in November was mainly caused by the return of these temporarily unemployed people to the market. Among them, the education, medical and other sectors contributed 112,000 new employment data, accounting for 49% of the total new employment.

In addition to the employed population, the slight increase in the unemployment rate and the decline in the labor participation rate are "bad" in market expectations that part. The number of newly unemployed people rose to 160,000 in November, a further increase from the previous figure of 150,000. Judging from Trump’s speech after taking office in November, the rise in unemployment may be related to his plan to tighten immigration and spending.

Although it currently seems difficult to deport undocumented immigrants in the country, tightening the borders will Reducing the net inflow of immigrants is expected to be effective. As for the U.S. job market, there are many illegal immigrants among workers in tourism, hotels, warehousing services and other industries. With the implementation of Trump's policy in 2025, it may cause further fluctuations in employment data.

December interest rate cut Expectations are full, but follow-up uncertainty is high

After the release of CPI data, the market is optimistic about the Fed's interest rate cut in December. Confidence has basically reached a certain level. According to CME futures forecasts, the probability of a rate cut on December 18 has reached 99.9%. However, CME's expectations for interest rate cuts in 2025 are relatively pessimistic. It is expected that the total interest rate cut in 2025 will be only 50BP, with one in the first and second half of the year.

The reason is that the current prospects of the United States , there are many expectations of rising inflation, which may affect the Fed's long-term decision-making. Judging from Trump’s current platform, whether it is further corporate tax cuts, increased overseas tariffs, or the tightening of immigration mentioned above, his direction for inflation is to expand. , and is likely to increase the CPI core goods/CPI core service indicators that are currently considered the most stubborn.

Although Fed officials, including Powell, currently agree that there is no risk of a sharp rebound in U.S. inflation. On the other hand, if inflation remains at the current level for a long time, residents Inflation expectations may further worsen, and the original "stubborn inflation disease" will be regarded as the norm, and the Fed's de-inflation process may become more difficult.

And for investors paying attention to the U.S. market, the uncertainty brought about by Trump after taking office is much higher than that by Biden. The most eye-catching one is the one led by Elon Musk There are still many unknowns in the U.S. administrative reforms brought about by the Efficiency Department. There are still many unknowns in the deregulation program announced by it. How the private sector will absorb the additional labor, what impact internal layoffs will have on the administration, and even the transition between Biden and Trump. The impact is still shrouded in mystery.

Since the start of the interest rate cut cycle in September 2024, the Federal Reserve has always preferred employment data in data selection. However, as the environment changes, The possibility of "reflation" caused by Trump's administration has become a dark cloud over the Federal Reserve's interest rate meeting. Considering the two factors, the Fed's data priority may once again shift to inflation.

What is certain is that Trump’s second term will be different from the past and will bring about many unconventional operations. Therefore, the market and even the Federal Reserve’s interest rate meeting remain cautious about future expectations. In fact, it is a kind of A very pragmatic approach. For market analysts, the days after January 2025 may be the high-pressure moment when the challenge begins.