US inflation data taken well by markets

Investors breathed a sigh of relief after the much-anticipated December US CPI report was released on Thursday. The annual inflation rate came in at 6.5%, the sixth straight month of slowing but still remains more than three times above the central bank’s target of 2%. Investors are hopeful that US inflation peaked at 9.1% in June of last year.

Bonds and stocks rallied with much of the action apparently driven by short-covering. Markets are now pricing in a 90% chance that the next move in interest rates will be a smaller-than-previously-expected hike of 0.25% in early February.

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