Evening digest: Markets cheer softer CPI, Powell support builds, crude rallies on Iran risk
Markets wrapped the day, juggling easing inflation, central bank politics, and rising geopolitical risk.
A cooler US CPI print revived expectations for earlier Fed rate cuts, while an unusual alliance of global policymakers and Wall Street leaders rallied behind Chair Jerome Powell amid signs of political pressure.
Meanwhile, oil surged as Washington hardened its posture toward Iran, adding a fresh risk premium to crude.
The fallout is spreading to trade, with India’s rice exports to Iran slowing sharply as unrest and sanctions fears curb demand.
Cool CPI reignites Fed cut bets
The December CPI report delivered relief to markets betting on interest rate cuts.
Core inflation clocked in at 2.6% annually, a meaningful slowdown that undercut economist forecasts and suggests price pressures are finally easing after months of stubborn readings.
The softer-than-expected data reignited Fed cut speculation, with traders now pricing in lower rates sooner than previously anticipated.
This marks a critical inflection point for monetary policy.
If the trend holds through January and February, the Fed could begin its cutting cycle by spring, potentially supporting equities and bonds simultaneously.
Wall Street’s reaction will hinge on whether this dip signals genuine disinflation or merely a temporary pause in climbing prices.
Global heavyweights rally behind Powell
Fed Chair Jerome Powell is getting unexpected armor from an unlikely coalition.
Global central bank heads and Wall Street titans are rallying behind him as the Trump administration signals potential pressure on his leadership.
The show of support underscores Powell’s credibility on the international stage; his measured approach to inflation and rate cuts has earned respect across borders.
For Powell, this backing matters politically; it raises the reputational cost of any administration moves against him.
The unified stance also signals confidence in the Fed’s independence, a cornerstone of market stability.
Oil surges on Iran escalation fears
Oil rallied hard on Trump’s Iran pivot.
A 3% jump reflects immediate market conviction that tensions in the Middle East are escalating, and canceled diplomatic talks with Tehran signal a tougher stance that could disrupt crude supplies or trigger regional instability.
Traders priced in geopolitical risk premiums instantly.
The “help is on the way” messaging to protesters adds another layer: it hints at potential US intervention or sanctions tightening, both bearish for global oil flows.
Energy stocks caught the bid alongside crude futures.
Iran turmoil hits India’s rice exports
India’s rice export engine to Iran is sputtering.
Street protests and tariff uncertainty are freezing buyer appetite just as New Delhi counts on these shipments for foreign exchange and farm support.
Iran, a top destination for Indian rice, is pulling back amid domestic unrest and potential US sanctions escalation, both dampen import demand.
For Indian farmers and exporters, this is a headache: rice stockpiles could build, pressuring domestic prices and rural incomes.
The broader play: geopolitical risk is reshaping trade flows in real time.
India’s agricultural sector, already vulnerable to monsoon swings, now faces demand shocks tied to Middle East tensions.
Policy clarity is urgently needed to stabilize farmer confidence and export projections.
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