Inflation Tops Expectations in December, Signaling Interest Rates May Stay Higher for Longer
• Inflation rose to 3.4% in December, higher than expected and damping hopes of imminent rate cuts • 3% inflation not necessarily problematic, but market expectations of returning to pre-pandemic low rate environment are • Lower rates boost lending and growth; higher rates have opposite effect • Inflation remains above Fed 2% target despite falling from June peak • Labor markets still tight, signaling rates likely to stay higher for longer