The December Consumer Price Index (CPI), scheduled for release Wednesday at 8:30 a.m. ET, will offer fresh insights into inflation trends as investors reassess the Federal Reserve’s potential path for interest rates in 2025. Analysts anticipate the report to show annual headline inflation climbing to 2.9%, a modest rise from November’s 2.7%. Monthly consumer prices are expected to grow by 0.4%, surpassing the previous month’s 0.3% increase, driven by seasonal factors such as higher fuel costs and persistent food price inflation.
Core inflation, which excludes food and energy prices, is projected to remain steady at 3.3% year-over-year for the fifth consecutive month. Monthly core price growth is expected to match November’s 0.3% increase. According to Bank of America economists Stephen Juneau and Jeseo Park, the data reflects inflation settling moderately above the Federal Reserve’s 2% target, with core services—such as insurance and medical care—continuing to exert upward pressure.
Economic Calendar on 15/01/2025
“Shelter prices have cooled compared to earlier in 2024 but remain elevated, indicating room for further moderation,” Juneau and Park noted. Rental prices are anticipated to rise by 0.2% month-over-month, while owners’ equivalent rent, a measure of hypothetical homeowner rental costs, is expected to edge up 0.3%. However, categories like airfares and lodging, which surprised on the upside in November, may show signs of easing in December.
Political dynamics further complicate the inflation outlook. The upcoming inauguration of Donald Trump as president has raised concerns over inflationary pressures stemming from his proposed policies, including tariffs, corporate tax cuts, and immigration restrictions. These measures, analysts suggest, could exacerbate the Federal Reserve’s challenge of balancing price stability with economic growth.
Adding to the complexity, labor market strength and recent inflation trends suggest the central bank may opt for a cautious approach to rate cuts. While markets remain divided, current odds of a 25-basis-point cut by June stand at roughly 40%, signaling uncertainty over the Fed’s next steps. As Ryan Sweet, chief U.S. economist at Oxford Economics, observed, December’s CPI is unlikely to ease the Fed’s concerns, further delaying decisive rate adjustments.