Is Inflation Finally Slowing?

by Ana Lopez

Following the November inflation report, US equities rose amid lower-than-expected inflation levels.



Yuichiro Chino | Getty Images

The Bureau of Labor Statistics reported Tuesday that the consumer price index (CPI) rose just 0.1% in November and 7.1% since last year. The report came as a welcome surprise, as analysts had previously estimated a 0.3% month-over-month increase and a 7.3% increase over 12 months. In addition, November’s numbers mark a much slower rate of inflation than October, when CPI rose 0.4% and 7.7%, respectively, from the previous year.

Given the unexpected numbers, US stocks rallied after the report. The Dow Jones Industrial Average gained 521 points or 1.5%; the S&P 500 added 2.3%; and the Nasdaq Composite rose 3.2%, That reports CNBC. On Tuesday, stock gains were widespread, with 2,630 New York Stock Exchange-listed stocks rising and only 190 falling.

Related: This is why the CPI report will dictate the bottom of the market

“That was a big surprise and the markets are reacting accordingly,” Steve Sosnick, chief strategist at Interactive Brokers, told CNBC. “Today is a day where the whole bullish scenario works. Yields are lower in the inflation story. Equities like the story of a less restrictive Fed and the dollar is weaker, which is also good for equities.”

November’s inflation data could also influence the Fed’s decision on the next rate hike at its two-day policy meeting starting Wednesday. With inflation showing signs of slowing down, the report could convince the Fed to raise rates a little less aggressively.

See also: Treasury Secretary Janet Yellen predicts ‘much lower inflation’ by the end of 2023

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