While December’s overall inflation data came in slightly above expectations, the core CPI figure (which strips out the volatile food and energy sectors) was somewhat below estimates, creating a “huge sigh of relief” for the bond and equity markets, said George Cipolloni, portfolio manager at Penn Mutual Asset Management.
“The (CPI) numbers were mostly in line, but apparently the market was pricing in an even higher level of risk,” he said. Penn Mutual has $39.1 billion in assets under management.
Tina Adatia, head of fixed-income client portfolio management at Goldman Sachs Asset Management, said the softer-than-expected core CPI reading should cool fears of a reacceleration in inflation.
Still, Adatia noted that “while today’s release is likely insufficient to put a January rate cut back on the table, it strengthens the case that the Fed’s (Federal Reserve's) cutting cycle has not yet run its course.” She added that “with labor market data remaining robust, however, the Fed has scope to be patient, and more good inflation data will be required for the Fed to deliver further easing.”
GSAM has $3.14 trillion in assets under supervision.
The Bureau of Labor Statistics reported Jan. 15 that the consumer price index rose an annualized 2.9% in December from a year earlier, above the 2.7% figure recorded in November, and also above forecasts.
Economists were expecting a 2.8% annualized CPI figure for December, according to financial data firm FactSet Research Systems. However, excluding the volatile food and energy sectors, the core CPI rose by an annualized 3.2% in December, slightly below the 3.3% pace reported in the prior month, and below the 3.3% forecast of economists.