US core inflation undershoots forecasts, raises early rate cut speculations

US core CPI rises less than forecasts predicted: The US’ annual core consumer price index (CPI) — which excludes the food and energy baskets — rose by 0.2%, the slowest pace in six months, according to the US Bureau of Labor Statistics report (pdf). Forecasts had predicted a fifth consecutive 0.3% rise.

The Fed needs more proof to speed up cuts: This development will not merit a rate cut in the next Federal Reserve meeting later this month, but if next month turns up with another “soft CPI print” and a "weakening in payrolls” then a March rate cut is plausible, chief global strategist at Principal Asset Management Seema Shah tells Bloomberg.

Still, all options are on the table: The current pricing patterns and future predictions indicate a 50-50 chance of two rate cuts throughout 2025 by 25 bps, with markets expecting the next cut to take place in May or June, CNBC reports.

Growth levels of jobs and wages support a longer hold on cuts, as the US economy added 256k jobs in December, according to data from the Bureau of Labor Statistics. The unemployment rate declined to 4.1%, one-tenth of a point below expectations, CNBC reports.

Trump’s policies might pressure inflation: Some economists predict that Donald Trump’s tariffs will put extra pressure on inflation after his inauguration next week. Trump vowed to impose a 60% tariff on Chinese goods, followed by an additional 10%, as well as a 10% tariff on imports from other countries, denying any intentions to water down the rates.

THE CLOSING BELL-

The EGX30 rose 0.7% at Thursday’s close on turnover of EGP 3.7 bn (2% below the 90-day average). International investors were the sole net buyers. The index is down 0.5% YTD.

In the green: Abou Kir Fertilizers (+3.8%), Beltone Holding (+3.4%), and Sidpec (+2.5%).

In the red: Eastern Company (-1.7%), Cleopatra Hospitals (-1.2%), and Faisal Islamic Bank -USD (-0.9%).