Cartons were displayed at a grocery store and warned that the eggs will be restricted in New York City on February 10, 2025 as the bird flu continues to affect the egg industry.
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The January Consumer Price Index report may tell a familiar story: Another month, another expected inflation rate is related to that inflation FedThe goal is to have a lot of concerns about what is happening from here.
So, the market readings will not change much from December, but look for hope through the details of the trend, which may bring some hope that the Fed will eventually be able to again Lower interest rates.
“Inflation is fixed on the target, risk is skewed upward, activity is strong, and the labor market seems to be stable around full employment,” Bank of America economist Stephen Juneau said in a note. “If we The CPI forecast for January is correct, and the cases that the Fed keeps shelved will be further strengthened.”
Bank of America is one of the most pessimistic voices on Wall Street, as expectations are further alleviated.
In fact, economists at banks believe that as inflation gets higher and labor markets remain strong, the economy will often avoid the hassle of using lower interest rates. Traders would otherwise think the Fed would approve a quarter-point reduction in July and then approve it, according to CME Group data.
More directly, Bank of America’s forecast is almost linked to the Dow Jones outlook: the full-project index increases by 0.3% per month, while the 12-month inflation rate is 2.9%, which is the same as December. In addition to food and energy, the respective core readings are expected to be 0.3% and 3.1%, with the annual mark only December read 3.2%.
According to Goldman Sachs, increased car prices and auto insurance and communications may drive from a detailed standpoint. The company expects air tickets to have only moderate downward pressure, and importantly, the categories related to rent account for about one-third of the CPI weighted and are largely responsible for inflation that exceeds the Fed’s 2% target.
Things will only get more complicated from here.
Despite the concerns about tariffs, optimistic
While economists expect a big dissolution with some key categories, President Donald Trump’s tariffs Can act as a counterweight for inflation.
“Looking forward, we see further dissolutions in the second year, from the rebalancing of automobiles, housing rentals and labor markets, but offset by tariff escalation,” Goldman Sachs economists said in a report.
However, there is some good news lately. and University of Michigan Consumer Survey Showing surprising inflation expectations, other measures suggest that the outlook is actually softening.
this National Independent Business Federation January showed that only 18% of small business tables reported that inflation was its biggest problem, the lowest level since November 2021. Survey on company inflation expectations It shows that CEOs and other executives are looking to CPI to run at a rate of 3.2% over the next 12 months. Although this is well above the 2% standard, it dropped sharply in the fourth quarter of 3.8%.
Amid conflicting messages, the Fed is expected to stay.
Fed chair Jerome Powell Said Tuesday The central bank is not in a hurry To further lower interest rates, Cleveland Fed President Beth Hammack pointed out that the persistent inflation could be exacerbated by the reason for retention that tariffs have increased.
“Although monetary policy must be forward-looking in nature, predictions cannot replace realization,” Hamak said.
