Interest Rate Cuts 'On Hold... If There Are Any At All In 2025' After December's Sticky Consumer Inflation Report: Economists

Consumer inflation showed a slight decline in December, with the core Consumer Price Index (CPI) registering at 3.2% year-over-year, which was slightly below the expected 3.3%. The headline CPI, meanwhile, increased by 2.9% on a year-over-year basis, matching expectations. This latest CPI data will be an important point of consideration for the Federal Reserve as it prepares for its next interest rate decision later this month.

Expert Perspectives: According to Chris Zaccarelli, the chief investment officer at Northlight Asset Management, the reductions seen in both monthly and yearly core inflation figures may ease some pressures in both stock and bond markets.

Joseph Brusuelas, who serves as chief economist for RSM, noted that despite the slight easing, inflation remains persistent and appears to be stuck above the Fed's target rate of 2%. He emphasized the service sector and the housing market as particularly challenging areas contributing to this phenomenon.

Brusuelas added, "The December CPI confirmed the prevailing view at the Federal Reserve that any further interest rate cuts—if they occur at all in 2025—should be put off until at least the second half of the year.”

Larry Tentarelli, chief technical strategist for Blue Chip Daily Trend Report, remarked that although the lower core inflation number is a positive development, he does not foresee rate cuts from the Fed in the first quarter of the coming year. "With inflation data remaining somewhat sticky and the labor market showing strength, we expect the Fed to maintain its current stance for the next several months, unless employment data sees a significant decline,” Tentarelli suggested.

Jamie Cox, managing partner at Harris Financial Group, interpreted December’s mixed CPI figures as an indication that inflation is gradually being reduced from the economy. He stated, "The narrative is not that core inflation is accelerating, which was a concern for the market. The current data does not support such extreme worries about inflation re-emerging.”

Market Reactions: Following the release of these figures, major U.S. stock indices opened on a positive note. The SPDR S&P 500 ETF Trust (SPY) was up by 1.71%, trading at $592.12, while the Invesco QQQ Trust (QQQ), which tracks the Nasdaq 100 index, rose by 2.09% to $515.64 at the time of the report.

inflation, economy, federal-reserve