Weekly Economic Update: January 16, 2024
• Yields fell over the week with the two-year Treasury note dropping by twenty-six basis points to 4.14% while the five-year note decreased by nineteen basis points to 3.83%.
• Headline CPI advanced by a faster than expected 0.3% in December and 3.4% in 2023 while core CPI matched expectations in the month at 0.3% and fell to an annual pace of 3.9% down from 4.0% in November.
• The Producer Price Index, a measure of wholesale inflation fell in every month of the fourth quarter as non-labor costs have been cooperative with the Fed’s mandate of price stability, however the Fed would like to see further moderation of service prices and slower wage growth which can support faster services inflation.
• Markets continue to price a more aggressive easing cycle into the yield curve than the Fed forecasts and will focus their attention this week on the December retail sales report due out on Wednesday and the UM Consumer Sentiment Index on Friday.