The latest inflation data from the United States signals persistent price pressures, reigniting concerns about the Federal Reserve’s trajectory on interest rates. December’s Consumer Price Index (CPI) showed a year-on-year increase of 3.5%, holding steady from the previous month. Core inflation, excluding volatile food and energy prices, remained resilient at 4.1%, challenging the Fed’s efforts to bring inflation back to its 2% target.
Economists warn that sustained price growth could force the Fed to maintain higher rates for longer. Despite moderating energy costs, strong wage growth and robust consumer spending continue to drive inflationary pressures. Investors are now pricing in a higher probability of additional rate hikes in the first half of 2025, with futures markets reflecting expectations for prolonged monetary tightening.
While the economy remains resilient, policymakers face a delicate balance to avoid tipping it into a slowdown. Persistent inflationary trends may complicate efforts to achieve a soft landing, keeping markets and analysts on edge for the Fed’s next moves.
