US inflation subsides

<p>Kia ora,</p><p>Welcome to Wednesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.</p><p>I'm David Chaston and this is the International edition from Interest.co.nz.</p><p>Today we lead with news the inflation landscape seems to be changing quickly now.</p><p><a href="https://www.bls.gov/news.release/cpi.nr0.htm" target="_blank"><strong>American inflation slowed more than expected in November</strong></a>, an encouraging sign for Federal Reserve officials who are now meeting in Washington to discuss the next steps in their policy campaign against rapid price increases. The headline rise was 7.1%, a drop from October's 7.7%. Markets had expected a 7.3% rate.</p><p>But more importantly, the change to November from October was at an annualised rate of less than 1.5%. And in actual, but not seasonally adjusted terms, it fell at about the same annualised rate. Either way, the impetus has gone out of the American inflation surge in November.</p><p>Core inflation rose at about a 2.5% annualised rate in November from October, but that too was less than expected.</p><p>All of these shifts do have markets wondering how the recently hawkish Fed will assess this data. Markets are expecting tomorrow's December rate hike to be +50 bps to 4.5%. But the view of how policy is to be set for 2023 will be the key factor markets will be watching for. After today's data, they seem to be betting there will be less need for the Fed to take as hard a stance as they did in 2022. Which means 2023 will face less inflation pressure and fewer rate hikes. And that a soft landing is much more likely now. Commodity prices rose. Bond rates fell. And the US dollar retreated on the rising risk appetite.</p><p>Meanwhile the US <a href="https://www.redbookresearch.com/" target="_blank"><strong>Redbook retail sales data</strong></a> for last week improved from the week before, but only slightly, and by less than inflation. It rose by +5.9% from the same week a year ago.</p><p>In China, one of the co