A lower than expected headline number on consumer inflation in November hasn’t been enough to send stocks higher ahead of tomorrow’s Taper/No Taper decision from the Federal Reserve’s Open Market Committee
Lower than expected inflation, the consensus has been, would be a reason that the Fed might not decide to begin a taper of its $85 billion a month in asset purchases at its December meeting. Withdrawing stimulus, even a little stimulus, from an economy showing such a low rate of inflation could increase fears that the economy might be headed into deflation.
Today, though, I think the uncertainty of tomorrow’s result has pulled some money to the sidelines without reference to the inflation data.
But the size of the drop—just 0.23% on the Standard & Poor’s 500 as of 3:30 p.m. New York time—says to me that the financial markets aren’t deeply worried about tomorrow’s result at the Fed.
Headline inflation was flat in November after dropping 0.1% in October. The consensus among economists surveyed by Briefing.com was looking to an increase of 0.1% in November. The biggest factors in the drop were energy prices, which dropped 1% in November and motor fuels, which fell 1.6%.
The core inflation number, which excludes volatile food and energy prices, climbed 0.2% in November. That ended a string of three consecutive months of 0.1% growth in core inflation. Core inflation is up 1.7% for the last 12 months.