Inflation Data Clouds Path for Fed Rate Cuts This Year
• Core CPI and PPI came in hotter than expected in January, underscoring challenge of reaching 2% inflation target • Policymakers note need for more evidence of sustained disinflation before cutting rates • Market expectations adjusting from anticipation of numerous cuts to more moderate 3-4 cuts around mid-year • Economic strength implies price pressures unlikely to erode rapidly • Fed emphasized need for disinflation evidence before rate cuts; March and maybe May cuts now off table