As we had expected, the Fed chose to hike the Fed Funds Rate by 50 points instead of the aggressive 75 points that we've grown accustomed to. This marks the seventh rate hike of the year, an effort intended to curb inflation. In their post-meeting statement last Wednesday, the Fed stated that they would continue the rate hikes.
The market's initial negative reaction shifted after Jerome Powell acknowledged the welcomed decrease in the inflation reading from October and November. He also signaled that there would be a 25-point rate hike at the February meeting, a continued slowing pace.
The measure of consumer-level inflation, the Consumer Price Index (CPI), showed a decrease in inflation of 0.6% to 7.1%. Core CPI, which removes the prices of food and energy, also resulted in an annual decrease of 6%. It's important to note that the cost of shelter makes up almost 40% of the Core CPI increase, playing a big role in the CPI report.
More real-time data shows that rental prices are starting to level out. Apartment List, for example, releases a National Rent Report which shows that prices of rentals are up 4.7% through November, which is much lower than the 18% rise this time last year. We'll likely see the effect of these moderated shelter costs in the coming inflation reports.
There will be plenty of market news this week prior to the Christmas holiday weekend. Next week, we'll break down the Housing Market Index and Existing Home Sales data. Stay tuned.