- ORIGINAL NEWS
Thursday’s inflation report could challenge the market outlook for big Fed rate cuts
- SUMMARY
Inflation in December 2023 is expected to rise slightly, potentially challenging the market’s anticipation of interest rate cuts by the Federal Reserve.
The central bank aims to balance its policy to prevent inflation resurgence and avoid a recession.
While the market expects aggressive rate cuts, the Fed is emphasizing maintaining tight financial conditions to ensure inflation control.
Public statements from Fed officials suggest a cautious approach, and gradual normalization involving rate adjustments and balance sheet reduction is more likely.
The inflation report will likely show subtle changes in headline numbers, and core inflation is expected to show improvement.
The Fed’s goal is to calibrate its policy effectively to achieve economic stability.
- NEWS SENTIMENT CHECK
- Overall sentiment:
negative
Positive
“Policy is too restrictive given where inflation is and likely where it’s going.”
“The Fed is clearly positioning itself to put a floor under the economy as we head into the second half of the year with rate cuts, and create the conditions for reacceleration of the economy later this year or next year.”
Negative
“Economists expect that inflation nudged higher in December, a trend that could call into question the market’s eager anticipation that the Federal Reserve will slash interest rates this year.”
“At a time when the Fed is fighting inflation through tight monetary policy including elevated rates, news that prices are holding at high levels could be enough to disrupt already-fragile markets.”