Recent inflation reading likely keeps the Ate up pause for now

Fresh inflation data released Wednesday is more likely to keep the Federal Reserve on pause during its next policy meeting this month, though a latest reading did show some signs of easing.

On a “core” basis, which eliminates the more volatile costs of food and gas, the December Consumer Price Index (CPI) climbed 0.2% over the prior month, a deceleration from November’s 0.3% monthly gain. On an annual basis, prices rose 3.2%.

It was the primary drop on a core basis after three months of being stuck at 3.3%.

“This latest inflation reading confirms a Fed rate cut skip on the January FOMC meeting,” said EY chief economist Gregory Daco.

The brand new print “won’t change expectations for a pause later this month, but it surely should curb a few of the talk concerning the Fed potentially raising rates,” said Ellen Zentner, chief economic strategist for Morgan Stanley Wealth Management.

The Fed next meets on Jan. 28-29, and investors are nearly unanimous of their view the central bank will leave rates unchanged after reducing them by a full percentage point in late 2024.

“We’re making progress on inflation, it’s just very slow,” former Federal Reserve economist Claudia Sahm told Yahoo Finance Wednesday. “Cuts are usually not coming later this month, but that doesn’t suggest they don’t seem to be coming later this 12 months.”

Read more: How the Fed’s rate decision affects your bank accounts, loans, bank cards, and investments

Recent York Fed president John Williams said after the CPI release that “while I expect that disinflation will progress, it should take time, and the method may perhaps be choppy.”

The economic outlook, he added, “stays highly uncertain, especially around potential fiscal, trade, immigration, and regulatory policies” — a reference to possible changes that might occur as a part of the incoming Trump administration.

A lot of Fed officials in recent weeks have been urging caution on future rate cuts.

The truth is, the Fed’s December meeting minutes showed officials believed inflation could take longer than anticipated to achieve their 2% goal, citing stickier-than-expected inflation data since past fall and the risks posed by latest policies of Trump 2.0.

They noted “the likelihood that elevated inflation may very well be more persistent had increased,” in response to the minutes, though they still expected the Fed to bring inflation right down to its 2% goal “over the following few years.”

Several members of the Fed even said at that meeting that the disinflationary process can have stalled temporarily or noted the chance that it could.

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