Investing.com -- The latest U.S. Consumer Price Index (CPI) report has sparked a range of reactions from Wall Street analysts, with key implications for Federal Reserve policy and market expectations.
ING maintained its forecast of three rate cuts in 2025 but adjusted its timing, suggesting cuts may begin in June rather than March.
“Focus on the blue bars, which are the MoM. We need to see them averaging 0.17% MoM (the black line) in order to be confident the annual rate of core inflation is on the path to the 2% target,” said the firm, noting that current inflation levels are "still running too hot for comfort."
Morgan Stanley (NYSE:MS) interprets the softer-than-expected CPI figures as further evidence of disinflation, particularly within core services excluding housing.
The bank expects a March rate cut, emphasizing the print's support for the narrative that recent inflation acceleration was temporary. “ Weaker inflation should give the Fed more confidence that recent acceleration was just a bump,” said the bank.
Morgan Stanley foresees sequential inflation acceleration in January due to seasonality but anticipates a meaningful year-over-year decline.
Wolfe Research describes the CPI data as slightly softer than expected, projecting a modest 0.19% increase in December core PCE inflation, with a year-over-year rate of 2.8%. Wolfe expects two rate cuts in 2025, likely in May and September, suggesting the print helps counter overblown Fed hiking expectations.
Wells Fargo (NYSE:WFC) notes that while headline inflation was hot in December due to food and energy prices, the core CPI showed improvement. However, the bank remains cautious, pointing out that the inflation trend is still stubbornly above the Fed's target. As a result, Wells Fargo now anticipates only two rate cuts in September and December, down from the previously expected three.