Upcoming CPI Report Could Shape Federal Reserve's Rate Cut Outlook
Easing inflation expectations and solid economic data point to potential rate cuts later in 2025, though uncertainties around tariffs and consumer sentiment persist.
- The January Consumer Price Index (CPI) report, set for release on February 12, is expected to show a deceleration in year-on-year inflation due to base effects, potentially influencing Federal Reserve rate cut decisions later in 2025.
- The January jobs report revealed 143,000 new jobs, a slowdown from December's revised 307,000 figure, while unemployment fell to 4.0%, the lowest since May 2024, signaling labor market resilience.
- Market concerns over potential new U.S. tariffs and a rise in inflation expectations have led to declines in stock market indices, with the S&P 500, Nasdaq, and Dow all posting losses for the week.
- Federal Reserve officials, including Chicago Fed President Austan Goolsbee, suggest that interest rate cuts may occur in the next 12–18 months but are unlikely at the March meeting as inflation remains above the Fed's 2% target.
- Consumer sentiment dropped to a seven-month low in early February, with inflation expectations rising to 4.3% for the next year, reflecting heightened economic uncertainty.
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