The newest inflation numbers are out, and Wall Street analysts are buzzing with their takes on what it all means for the Federal Reserve and the economy. The Consumer Price Index (CPI) data, which measures changes in the prices of goods and services, has everyone guessing about the Fed’s next moves.
Analysts at ING are tweaking their expectations for rate cuts in 2025. Instead of starting in March, they now think the first cut might happen in June. They point out that inflation is still running hotter than the Fed would like, and monthly price increases need to settle at a much lower pace before things are back on track.
Morgan Stanley is feeling more optimistic. They see the softer CPI numbers as proof that inflation is cooling off, especially in areas like core services (excluding housing). The bank predicts the Fed will cut rates as early as March, believing the recent inflation uptick was just a temporary hiccup. While January might see a small seasonal rise in inflation, Morgan Stanley expects the overall trend to show a sharp decline later on.
Over at Wolfe Research, the CPI data came in a little gentler than expected. They’re forecasting a modest rise in core inflation for December, around 0.19%, and think inflation will settle at 2.8% year-over-year. Wolfe believes this report might ease some of the worries about the Fed raising rates too much and sees two rate cuts in 2025, likely in May and September.
Wells Fargo, on the other hand, is taking a more cautious stance. They noted that while December’s headline inflation was driven up by food and energy prices, the core CPI showed some progress. Even so, inflation is still above the Fed’s target, and Wells Fargo has scaled back its rate cut expectations. Instead of three cuts, they now expect only two, likely coming in September and December.
Wall Street’s mixed reactions show just how closely everyone is watching inflation – and the Fed’s every move – as we head into 2025.
