US 5-year, 10-year inflation expectations rebound ahead of US CPI release

US inflation expectations as per the 10-year and 5-year breakeven inflation rates per the St. Louis Federal Reserve (FRED) data, challenge the recently dovish bias over the US Federal Reserve (Fed), as well as downbeat forecasts for the US Consumer Price Index (CPI). The inflation precursors might have taken clues from Friday’s mixed data to challenge the US Dollar Index moves ahead of the key US inflation readings.  That said, the latest prints of the 5-year and 10-year inflation expectations portray a rebound to 2.28% and 2.35% respectively.

It’s worth noting that the New York Federal Reserve’s (Fed) Survey of Consumer Inflation Expectations Survey stated that the 1-year ahead inflation expectations slumped to their lowest level since 2021 and marked the biggest month-to-month decline in November on record.

On Friday, downbeat prints of the United States Producer Price Index (PPI) also hinted at softer US inflation. However, the University of Michigan’s (UoM) Consumer Sentiment Index, as well as the US ISM Services PMI and inflation expectations from the UoM Survey, suggested firmer prints of the US CPI.

Amid these plays, market players forecast the US CPI for November to print a softer 7.3% YoY versus 7.7% prior figure. Further, the monthly CPI is likely to ease to 0.3% compared to 0.4% in previous readings. It should be noted that the CPI ex Food & Energy appears to be the key and is expected to be unchanged at 0.3% MoM, which can please the US Dollar Index (DXY) buyers in case of a firmer print.

Also read: US Dollar Index pares recent gains around 105.00 with eyes on US inflation, Fed