Revised US December CPI gives Fed a bit more breathing room

WASHINGTON (Reuters) – U.S. monthly consumer prices rose less than initially estimated in December, revised government data showed on Friday.

The consumer price index rose 0.2% in December instead of 0.3% as reported last month, annual revisions of the CPI data published by the Labor Department’s Bureau of Labor Statistics (BLS) showed. But data for November was revised up to show the CPI increasing 0.2% rather than 0.1% as previously estimated.

The revisions emanated from the annual recalculation of seasonal adjustment factors.

MARKET REACTION:

STOCKS: U.S. stock futures extended a slight gain and were last up 0.2%, still pointing to a solid opening on Wall StreetBONDS: The U.S. Treasury 10-year yield fell and was 4.1618%; Two-year yields fell to 4.467% FOREX: The was 0.08% lower

COMMENTS:

GENNADIY GOLDBERG, HEAD OF US RATES STRATEGY, TD SECURITIES, NEW YORK

“We’re still waiting for a lot of the details. My thoughts are going to be relatively high level. The market reacted to the downward revision to the headline for December, because the headline rounded down to 0.2% rather than to 0.3%. On an unrounded basis we went from 0.3 to 0.23%, so it’s a significant downward revision to headline inflation for December. But core inflation actually remained unchanged at 0.3%. and I think that’s really the more important thing. So, I suspect the market’s trying to figure out what to do here, and we’re still absorbing a lot of the details, but at first glance you’re not really seeing as much of a change to inflationary trends on a month-to-month basis as we did last year. It does seem like the revisions were a little bit more modest this time around.“

STEVEN RICCHIUTO, U.S. CHIEF ECONOMIST, MIZUHO SECURITIES USA LLC, NEW YORK

“The revisions aren’t going to make the Fed cut rates.

“The point really comes down to they’re in no rush. The market’s in a rush, (but) the Fed is sitting there saying we’re not in a rush. Actually, things are really pretty good from their perspective.

“The market is rushing because the leveraged investors have negative carry.”

BRIAN JACOBSEN, CHIEF ECONOMIST, ANNEX WEALTH MANAGEMENT, MENOMONEE FALLS, WISCONSIN“The revisions were much ado about nothing. This is becoming a trend where a Fed official mentions a data release once and then everyone waits with bated breath only to find out that it’s a bunch of noise. Chair Powell mentioned the preliminary reading of the University of Michigan Consumer Sentiment index as being important and now it’s not. The super core inflation was mentioned as important and now it’s not. Three-month annualized inflation used to be important but now apparently it’s not. The same thing has happened with the CPI revisions. Maybe Fed references to data releases is more a contrary indicator of what’s important than anything that they’re actually looking at.”

ART HOGAN, CHIEF MARKET STRATEGIST, B RILEY WEALTH, NEW YORK

    “A year ago, when these revisions came out, they were advanced higher and that changed everybody’s attitude about the ultimate level and duration of monetary policy.”

    “Today’s revisions are much more modest than they were last year. We’re in a different place this year in so much as we know that the Fed is done raising rates and this (data) wasn’t going to change that opinion.”