The latest inflation data showed a welcome moderation in core consumer prices, with December’s 0.2% increase marking the first slowdown in six months. Key factors contributing to the cooler reading included cheaper hotel stays, modest rent increases, and slower growth in medical care service costs. However, Federal Reserve officials remain cautious, requiring sustained evidence of inflation progress before adjusting their policy stance. The combination of this data with last week’s robust jobs report suggests the Fed will maintain current rates at their January meeting, with markets pushing back expectations for rate cuts. BMO Capital Markets notes that potential tariff implementations could further complicate the inflation outlook.
