US inflation data 'keeps alive' prospect of Federal Reserve rate cut - closing summary
US inflation data did not deliver a huge surprise on Friday, but the trajectory appeared to be enough to set up a Federal Reserve interest rate cut in March, several economists and investors argued.
Charles Hepworth, investment director at GAM Investments, said:
The Federal Reserve’s preferred measure of inflation was just released for the month of December 2023 and it keeps alive the chances of a rate cut in March.
Core PCE was forecast to show 0.2% growth over the month and it came in in-line with that and means the yearly PCE inflation rate is now 2.9% – much closer to the Fed’s target rate of 2% than it has been at any time over the last three years.”
Kieran Clancy, senior US economist at Pantheon Macroeconomics, a consultancy, said:
The bigger picture is that core goods inflation is now just above zero, core services inflation is falling and rent inflation is grinding lower, lagging private sector measures of rents for new tenants. The Fed’s inflation forecasts are stil too high – the December [summary of economic projections] shows core PCE inflation running above the 2% target until Q4 2026 – and will be revised down again in March, for the third successive quarter, giving the Fed the necessary hook on which to hang the first rate cut, either at that meeting or in May.
In the UK, the car industry has expressed its displeasure at the breakdown in talks with Canada over a trade deal to replace the pre-Brexit EU arrangement.
That gave zero tariffs for exports to Canada, but that deal will lapse in April, with little prospect of an agreement before then. The British farming lobby welcomed the continued protections against imports of hormone-fed beef, which is currently illegal in the UK.
In other business news:
The UK’s competition regulator will scrutinise the merger between the British mobile networks of Vodafone and Three.
Superdry has parted ways with its fourth finance boss in five years as losses widen at the troubled UK fashion brand.
The chief executive of the Telegraph has stepped down after seven years as the government prepares to launch a second investigation into public interest concerns raised by the Barclay family’s complex deal to transfer control of the titles to a UAE-backed consortium.
The Conservative peer Michelle Mone and her husband have reportedly had about £75m of assets frozen or restrained by a court order.
Shares in US chipmaker Intel slumped after it revealed a weaker forecast of earnings.
Germany’s consumers grew markedly more pessimistic looking ahead to February in a surprise that add further to concerns over a continued recession in the powerhouse of European output.
You can continue to follow the Guardian’s live coverage from around the world:
In US politics, Mitch McConnell walks back Trump-driven opposition to Ukraine and border deal
In our Europe coverage, French farmers protest as government prepares to announce new measures
In our coverage of the Middle East crisis: ICJ ruling a ‘reminder no state is above the law’, says Palestine, as Netanyahu says Israel is fighting a ‘just war’
In our coverage of the Russian war on Ukraine, a former Nato chief says Ukrainians are ‘fighting for us’ and ‘we need to do more’
Thank you for joining us this week. Next week we have: February! JJ
In Europe the UK’s FTSE 100 and France’s Cac 40 have both had strong days.
The FTSE 100 has gained 1.5%, or 114 points, to hit its highest since 12 January. Chemicals company Croda and drinks company Diageo have both gained more than 5%.
Fashion label Burberry, investment manager St James’s Place and pest controllers Rentokil Initial rounded up the top five gainers on Friday in London.
In France the Cac 40 gained a weighty 2.3% on Friday. It was helped by a 12% jump from LVMH, the conglomerate which owns the Louis Vuitton, Moët & Chandon and Hennessy brands, among many others.
LVMH reported a 10% gain in fourth quarter sales, sparking the surge in luxury goods companies that also benefited Burberry and other luxury brands in France including Kering and Hermès.
