Same old, same old!
US headline inflation came in at 0.4 per cent for the month, and 8.2 per cent for the year to October.
Markets had expected an annual result of around 8.1 per cent.
Core inflation also came in hotter than expected at 0.6 per cent for the month.
The legendary James Foster with the update charts:
Not ideal, and not for the first time!
After the initial inevitable tantrum the stock market then rallied extremely hard, to finish massively up on the day.
Why?
There are many possible explanations but I doubt anyone can say for sure the real reason why.
Andrew Brown with a fair explanation of why markets might simply be approaching peak bearishness.
On the inflation figures themselves, markets might simply be taking some heart from the fact that the headline rate of inflation is now at least on the way down from the highs of 9.1 per cent in June.
More convoluted explanations for the brighter outlook from the stock market highlight that markets are forward-looking, and although the inflation has been driven by a very strong increase in rents, in real time private sector measures show that rents are now stalling and declining, and food inflation should also decline from here.
A more sceptical way of looking at it is that we're sort of saying that excluding the things that went up, inflation isn't so bad!
Rents certainly seem to to be the biggie, given the composition of inflation measures in the US.
Whatever, there will still be further short-term pain in terms of further interest rate hikes in the US, with a 75 basis point increase fully priced in for the next Fed meeting.
Markets are expect the Fed to take the funds rate close to 5 per cent before finally relenting, which seems like a kamikaze move to me...
The Aussie dollar held fairly firm in the end, trading at 63.3 US cents this afternoon.
