{"id":6140,"date":"2025-01-16T17:32:13","date_gmt":"2025-01-16T22:32:13","guid":{"rendered":"https:\/\/guardianglobe.org\/?p=6140"},"modified":"2025-01-16T17:32:14","modified_gmt":"2025-01-16T22:32:14","slug":"u-s-inflation-eases-but-markets-remain-cautious-on-rate-cuts","status":"publish","type":"post","link":"https:\/\/guardianglobe.org\/?p=6140","title":{"rendered":"U.S. Inflation Eases, But Markets Remain Cautious on Rate Cuts"},"content":{"rendered":"\n<h2 class=\"wp-block-heading\">Stocks and Bonds Rally on Lower Core Inflation<\/h2>\n\n\n\n<p>A <strong>moderate U.S. inflation report<\/strong> triggered a <strong>sharp relief rally<\/strong> in both <strong>stocks and bonds<\/strong> on <strong>Wednesday<\/strong>, as investors welcomed signs of easing price pressures. The <strong>consumer price index (CPI)<\/strong> for <strong>December<\/strong> rose at a faster-than-expected pace, but markets focused on the <strong>core CPI<\/strong>\u2014which excludes volatile food and energy prices\u2014rising just <strong>0.2%<\/strong>, compared to <strong>0.3% in the previous four months<\/strong>.<\/p>\n\n\n\n<p>The <strong>S&amp;P 500 surged 1.8%<\/strong>, while the <strong>10-year U.S. Treasury yield<\/strong> reversed earlier losses and dropped to <strong>4.66%<\/strong>, as bond prices rose.<\/p>\n\n\n\n<p>\u201cThis reading beat expectations modestly, but traders pounce aggressively on any whiff of good news,\u201d said <strong>Steve Sosnick<\/strong>, market strategist at <strong>Interactive Brokers<\/strong>. \u201cIt&#8217;s a number and a reaction that we have to view positively, although quite possibly it&#8217;s magnified by the negativity we\u2019ve been battling.\u201d<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Market Uncertainty Lingers Over Fed Policy and Trump\u2019s Policies<\/h2>\n\n\n\n<p>Despite the rally, <strong>investors remain cautious<\/strong> about the future of <strong>Federal Reserve interest rate policy<\/strong> and the <strong>impact of incoming President Donald Trump\u2019s policies<\/strong> on <strong>inflation, tariffs, and taxes<\/strong>.<\/p>\n\n\n\n<p>\u201cThe issues that have been driving rates higher and weighing on stocks are still out there,\u201d said <strong>Art Hogan<\/strong>, market strategist at <strong>B. Riley Wealth<\/strong>. \u201cWe just don\u2019t know whether we\u2019ll see tariffs that are surgical or sweeping, what kind of policy moves we\u2019ll see in other areas that could feed into inflation or growth.\u201d<\/p>\n\n\n\n<p>Fed officials acknowledged the <strong>heightened economic uncertainty<\/strong> in the coming months as they wait to assess the <strong>fiscal policies<\/strong> of the new administration.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Traders Adjust Rate Cut Expectations<\/h2>\n\n\n\n<p>Before the <strong>CPI report<\/strong>, there were murmurs that the <strong>Fed might even consider a rate hike<\/strong>, according to <strong>Jeff Weniger<\/strong>, head of equity strategy at <strong>WisdomTree Inc.<\/strong> However, the latest inflation data has shifted expectations toward <strong>a rate cut by June<\/strong>.<\/p>\n\n\n\n<p>Following the report:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Traders now see a 50% chance<\/strong> of a <strong>second Fed rate cut by year-end<\/strong>.<\/li>\n\n\n\n<li>Previously, markets had priced in <strong>only one rate cut for 2025<\/strong>.<\/li>\n<\/ul>\n\n\n\n<p><strong>Tina Adatia<\/strong>, head of fixed income client portfolio management at <strong>Goldman Sachs Asset Management<\/strong>, noted that the <strong>CPI report strengthens arguments for rate cuts<\/strong>, but <strong>\u201cthe Fed has scope to be patient.\u201d<\/strong><\/p>\n\n\n\n<p>\u201cMore good inflation data will be required for the Fed to deliver further easing,\u201d Adatia said.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Tariff and Trade Uncertainty Could Impact Inflation<\/h2>\n\n\n\n<p>Even with slowing inflation, <strong>market volatility is expected to persist<\/strong>, especially with potential changes in <strong>U.S. trade policy<\/strong>.<\/p>\n\n\n\n<p><strong>Rick Rieder<\/strong>, BlackRock\u2019s chief investment officer of <strong>global fixed income<\/strong>, warned that <strong>Trump\u2019s potential changes to tariffs and trade policy<\/strong> \u201chold the potential to increase core goods inflation for a time.\u201d<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Volatility Likely to Increase<\/h2>\n\n\n\n<p>The market remains <strong>data-dependent<\/strong>, and <strong>daily swings of 10 to 15 basis points<\/strong> in the <strong>10-year Treasury yield<\/strong> could become the <strong>new normal<\/strong>, according to <strong>Kevin Flanagan<\/strong>, head of fixed income strategy at <strong>WisdomTree<\/strong>.<\/p>\n\n\n\n<p>With traders still pricing in <strong>uncertainty over fiscal policy<\/strong>, inflation data will be closely watched in the coming months to determine whether <strong>further rate cuts will materialize<\/strong> in 2025.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Looking Ahead<\/h2>\n\n\n\n<p>While the latest <strong>inflation report<\/strong> provided <strong>temporary relief<\/strong> to markets, <strong>uncertainty surrounding fiscal policy, tariffs, and the Fed\u2019s next moves<\/strong> will likely <strong>keep investors on edge<\/strong>.<\/p>\n\n\n\n<p>The <strong>next major test<\/strong> will be <strong>upcoming economic data releases<\/strong>, which could determine whether the <strong>Fed moves ahead with rate cuts or maintains its cautious stance<\/strong> in the months ahead.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Stocks and Bonds Rally on Lower Core Inflation A moderate U.S. inflation report triggered a sharp relief rally in both stocks and bonds on Wednesday, as investors welcomed signs of easing price pressures. The consumer price index (CPI) for December rose at a faster-than-expected pace, but markets focused on the core CPI\u2014which excludes volatile food<\/p>\n","protected":false},"author":5,"featured_media":6141,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[46],"tags":[3366,3361,3360,3367,3369,3365,3364,3368,3363,3362],"class_list":{"0":"post-6140","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-economy","8":"tag-bond-market-reaction","9":"tag-cpi-inflation-data","10":"tag-fed-rate-cuts","11":"tag-federal-reserve-interest-rates","12":"tag-market-volatility","13":"tag-sp-500-gains","14":"tag-stock-market-rally","15":"tag-treasury-yields-drop","16":"tag-trump-trade-policy","17":"tag-u-s-inflation"},"_links":{"self":[{"href":"https:\/\/guardianglobe.org\/index.php?rest_route=\/wp\/v2\/posts\/6140"}],"collection":[{"href":"https:\/\/guardianglobe.org\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/guardianglobe.org\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/guardianglobe.org\/index.php?rest_route=\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/guardianglobe.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=6140"}],"version-history":[{"count":1,"href":"https:\/\/guardianglobe.org\/index.php?rest_route=\/wp\/v2\/posts\/6140\/revisions"}],"predecessor-version":[{"id":6142,"href":"https:\/\/guardianglobe.org\/index.php?rest_route=\/wp\/v2\/posts\/6140\/revisions\/6142"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/guardianglobe.org\/index.php?rest_route=\/wp\/v2\/media\/6141"}],"wp:attachment":[{"href":"https:\/\/guardianglobe.org\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=6140"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/guardianglobe.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=6140"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/guardianglobe.org\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=6140"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}