Global: Rate cut outlook on track. US headline and core CPI both came in at 0.3% m/m sa, in line with consensus estimates. From our perspective, the sequence of firm inflation prints over the past four months increasingly suggests that disinflation may have stalled. Some caution in the pace of easing is warranted, but we do not see December’s Fed cut being derailed. Despite oil prices staying depressed over the past few months, market participants are increasingly cognisant that the decline in US inflation may already be behind us.

The market is pricing in the odds of a December’s cut at 98%, up from 85% before the CPI data was released. We are not convinced that the Fed would pause just yet—labour market weakness fears (which were responsible for the 50 bps Fed cut in September) have ebbed amid growing optimism in the US economy. US nonfarm payrolls rebounded to 227k in November, more than the 220k anticipated. October was also revised to 36k from 12k. The likelihood has increased for the Fed to pause after delivering its third consecutive rate cut expected at the 18 Dec Federal Open Market Committee meeting. Post-December, the Fed will want to assess the actual policies of US President-elect Donald Trump after his inauguration on 20 Jan 2025 before further adjustments are made.

After 100 bps worth of cuts (since June), the European Central Bank (ECB) have cut rates by another 25 bps, in line with expectations. ECB President Lagarde’s tone was dovish, saying that the Eurozone economy is losing momentum and that there are risks of greater friction in global trade. During her hearing at the EU Parliament on 4 Dec, ECB President Christine Lagarde expects inflation to be temporarily higher in 4Q24 before returning to the 2% inflation target in 2025. Lagarde will likely urge EU leaders for a fiscal union and a capital markets union. Unfortunately, Germany and France have weak economies, and their governments have collapsed due to disagreements over debt.

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