Most of last week has been about waiting on an event that didn’t cause any volatility in the end. US inflation remained hot in December but had not risen enough to change neither markets, nor the Fed’s perspective on monetary policy. However, the PPI report on Friday took on the role of giving investors the confirmation they had been seeking from the CPI print on Wednesday. Producer prices unexpectedly fell by 0.1% on the month, putting the year-on-year growth rate below 1%. With investors now pricing in rate cuts at every single meeting this year from March onwards, the room for disappointment is high. Especially against the backdrop of reflationary fears emerging from the supply and demand side in the United States.
Inflation outlook when considering geopolitics