Stocks rose on Wednesday after the December CPI print finally showing some relief in core inflation and investors calibrated Fed rate cut bets.
But the threat of sticky prices still looms large regime change in Washington when President-elect Donald Trump takes office next week. And economists largely agree that the fight to curb inflation is far from over.
“It hasn't been consistent on inflation,” Claudia Sahm, chief economist at New Century Advisors and a former Federal Reserve economist, told Yahoo Finance. Morning Brief program. “It's been pretty bumpy.”
Although inflation has been slowing down, it has remained higher than the The Federal Reserve's 2% target annually. Higher costs for shelter and core services such as medical care and insurance have contributed to stubborn readings in recent months, with consumers feeling the pressure at the same time in grocery stores a also at the pump.
“I don't think we're completely out of the woods here,” Ed Yardeni, president of Yardeni Research, told Yahoo Finance. Market Domination Overtime. “We must remember that towards the end of 2023, there were deflationary trends. And then we got to 2024 and we saw a bit of a reversal of that. “
An increase in wages and a strong labor market have somewhat offset recent pricing pressures, but fundamental trends have shown continued resilience in the categories most households rely on. That does the Fed's job even harder to pull off.
“It's a bit of a breather to get some 'not' bad news,” Sahm said, referring to December's slowdown in monthly core inflation and prices. But “it's not really a game changer. It's a lot more than what we've seen with the month-to-month volatility mixed in.”
And volatility is likely to rise with Trump set to take office on Monday.
Trump's proposed policies, such as high tariffs on imported goods, tax cuts for corporations, and restrictions on immigration, are considered inflation. And those policies it could complicate further the central bank's path forward for interest rates.