Inflation remains above target, labor markets are cooling but stable, and growth indicators point to moderation rather than contraction. Taken together, the data continues to support a hold in policy rates rather than an imminent shift toward easing.
Inflation: Progress Has Plateaued
Headline consumer inflation registered 2.7% year-over-year in both November and December, showing no meaningful decline across two consecutive months. Core CPI has also remained around 2.6%–2.7%, reinforcing the view that disinflation momentum has slowed.
While inflation is significantly lower than its 2022 peak, the Fed’s objective is not simply lower inflation, but inflation that is convincingly converging toward its 2% target. Flat readings near 2.7% do not meet that standard.
Sourec: BLS.gov
For policymakers, cutting rates while inflation is stalled at these levels would risk re-accelerating price pressures, especially in services and housing-related components.
In practical terms, inflation is lower, but not yet low enough.
Labor Market: Cooling Without Deterioration
Employment data indicates a gradual loss of momentum rather than structural weakness.
- November nonfarm payrolls: +64,000
- December nonfarm payrolls: +50,000
- Unemployment rate: 4.6% in November, easing to 4.4% in December
Source: https://www.investing.com/economic-calendar/nonfarm-payrolls-227
Job creation has slowed materially compared with prior years, but remains positive. Historically, the Federal Reserve has begun easing only after payroll growth turns negative or unemployment rises persistently.
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