November 30, 2023 (MLN): Asian markets struggled Thursday following another tepid performance on Wall Street, with a focus on the release of key US inflation data that comes as traders ramp up bets the Federal Reserve will cut interest rates next year, as APP reported.
Observers say signs the world's top economy is feeling the effect of long-running monetary tightening has given the bank room to take a more dovish approach to fighting inflation, which is sharply down from the four-decade highs seen in 2022.
That, combined with several Fed decision-makers indicating they are in favor of holding rates where they are, has given a much-needed shot of confidence to traders at the end of a tough year.
And the latest reports provided further optimism.
The Fed's Beige Book summary of the economy showed activity had slowed in recent weeks and the labor market continued to cool, policymakers have said some softening in jobs would be required in order to get inflation back to their 2% target.
Gross Domestic Product expanded quicker than expected in the third quarter and consumer spending growth slowed slightly.
The readings suggest the Fed is managing to control prices while not causing too much pain for the economy.
Eyes are now on the release of the personal consumption expenditures (PCE) index, the bank's preferred gauge of inflation, with forecasts pointing to a further retreat.
The core reading came in slightly lower than expected, data showed Tuesday.
"The Fed could find themselves in a 'sweet spot'," Jeffrey Roach at LPL Financial said.
"Inflation is trending lower, the consumer is still spending, but at a slower pace, and the Fed could end its rate hiking campaign without much pain inflicted on the economy."
Traders are now predicting a cut in the first half of next year.
