The November inflation report won't change Wednesday's Fed decision but could influence a slower pace of tightening next year, economist says

• Wednesday's rate hike decision won't be influenced by the latest inflation report, according to Ian Shepherdson.
• The Pantheon Macroeconomics chief economist wrote in a Tuesday note that the Fed could slow down in 2023.

The latest inflation report will do little to impact the Federal Reserve's rate hike decision on Wednesday but could lead to a slowdown in monetary tightening in 2023, according to Pantheon Macroeconomics.

Chief economist Ian Shepherdson wrote in a Tuesday note viewed by Insider that central bank chair Jerome Powell could strike a more tepid tone compared to the hawkishness on display in his November comments.

Ultimately, Shepherdson says, "this report does not change tomorrow's Fed decision; they will hike by 50bp." he added that Powell's "more dovish colleagues likely will be emboldened by this report" which could lead to a change in policy next year.

"We now think 25bp is more likely on Feb 1, and we think that will be the final hike," Shepherdson said. "Disinflationary pressure has been visible in the pipeline for some time, but now it is emerging where it counts, in the consumer data."

Shepherdon noted that rapid fall in used vehicle prices helped pull down core inflation - which strips out often volatile components like energy and food - which slowed to a 0.1% increase below expectations. He also posits that the 0.7% increase in rents last month, while volatile, could "slow sharply over the next year."