NEW YORK, Jan 13 (Reuters) - U.S. consumer prices increased in December, data showed on Tuesday, as the distortions related to the government shutdown that had artificially lowered inflation in the November unwound, cementing expectations the Federal Reserve would leave interest rates unchanged this month.
The Consumer Price Index rose 0.3% last month, the Labor Department's Bureau of Labor Statistics said on Tuesday. In the 12 months through December, the CPI advanced 2.7%, matching November's gain.
Economists polled by Reuters had forecast the CPI picking up 0.3%. The BLS estimated the CPI rose 0.2% from September to November.
MARKET REACTION:STOCKS: U.S. stock futures trimmed losses after U.S. CPI data.BONDS: U.S. Treasury yields dipped post-CPI. The 10-year yield was last down 1.6 basis points at 4.171%.FOREX: The dollar index pared gains to 98.93.
COMMENTS:
ADAM SARHAN, CHIEF EXECUTIVE, 50 PARK INVESTMENTS, NEW YORK:
"Any time inflation comes down that's good for stocks because of the simple fact that, that gives the Fed more room to cut rates. The market loves easy money from the Fed, and inflation has been public enemy No. 1...The Fed is moving toward an easier policy, less restrictive, even with stocks hitting all-time highs, and that's very bullish."
ART HOGAN, CHIEF MARKET STRATEGIST, B. RILEY WEALTH, NEW YORK: (via email)
"We got a modicum of good news with today's CPI report, which was milder than anticipated in December. While the headline number was in line with estimates at 2.7%, the core came in a tick cooler at 2.6%, versus an estimate of 2.7%. This should give the Fed some breathing room to cut rates in Q1 if the trend continues."
ELLEN ZENTNER, CHIEF ECONOMIC STRATEGIST, MORGAN STANLEY WEALTH MANAGEMENT, NEW YORK (via email)
"We've seen this movie before—inflation isn't reheating, but it remains above target. There's still only modest pass-through from tariffs, but housing affordability isn't thawing. Today's inflation report doesn't give the Fed what it needs to cut interest rates later this month."
GENE GOLDMAN, CHIEF INVESTMENT OFFICER AT CETERA INVESTMENT MANAGEMENT, EL SEGUNDO, CALIFORNIA:
"Overall market reaction today has reversed and turned positive as these readings reinforce the notion that inflation is moderating, and the Fed may be able to cut rates this year. Not to be outdone, the bond market also viewed CPI as positive as yields are lower, especially the Fed policy sensitive two-year U.S.Treasury.
PETER CARDILLO, CHIEF MARKET ECONOMIST, SPARTAN CAPITAL SECURITIES, NEW YORK:
"This inflation report suggests that tariff reflationary pressures remain and are consistent, but we're not seeing the explosive rise to the upside, which is a positive."
"The bottom line is we still have sticky inflation and that's mostly due to tariffs and the fact that we're not seeing any more aggressive increases is positive for the Fed."
"We still have to see what (inflation in) January looks like. But based on these numbers, this is likely going to be one more positive consideration for the Fed."
"It's too early. I don't think we're going to see (a rate cut) in January, but I do believe we'll see one in March and we'll probably have two rate cuts this year."
BRIAN JACOBSEN, CHIEF ECONOMIC STRATEGIST, ANNEX WEALTH MANAGEMENT, MENOMONEE FALLS, WISCONSIN:
"The consumer price index rose 2.7% from a year ago in December. The core index rose 2.6%. Because the government shutdown distorted to the downside the October and November numbers there was a lot of expectation that this report would be distorted to the upside. So much for that idea. The shelter index distortion won’t completely dissipate until Spring, but it does look like the inflation curve has bent and is heading towards the Fed's target instead of away from it."
"Yields can rally on this, but the tail wagging the dog of the long-end of the curve is Japan with their long-bond yields rising. Bond investors don't just have to watch the Fed, they have to watch everything everywhere."
(Compiled by the Global Finance & Markets Breaking News)
