Inflation Holds Steady, Yields Drop, and Moody's Issues Warning - Navigating the Economic Landscape

Consumer prices were unchanged from the previous month and rose 3.2% y-o-y, down from 3.7% in October. Core inflation, which excludes food and energy, was up 4% from a year earlier, the lowest level since September 2021. Markets reacted positively to the data, with 10-year U.S. Treasury yields falling about 20 basis points following the news and stocks extending recent gains to more than 9% above late October lows as the odds increased that the U.S. economy will experience a soft landing. Investors abandoned their estimates that the Fed will hike one last time, while adjusting prices to anticipate early rate cuts. In terms of debt, Moody's changed its outlook on US government issues from stable to negative, due to the high deficit and polarization between the different political parties that hinders decision making.

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