Summary of Key Points

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The probability of a March rate cut remains high despite December’s inflation rise.

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The annual inflation rate in December reached 3.4 percent, far surpassing the Fed’s 2 percent target.

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December’s increase in inflation could be a major concern for the Federal Reserve.

Hot Take

You ever play that game, “Push me, Pull you” as a kid? Well, the Fed seems to be in the middle of a raucous round, with inflation yanking one arm and rate cuts tugging at the other. Inflation, fresh off his Wheaties, gave a solid pull in December, rising to a robust 3.4 percent. It’s like he’s telling the Fed, “Hey, remember that measly 2 percent goal you set? Ha, cute!”

On the other hand, there are the futures markets, those hopeful glimmers in the dark, still rooting for a March rate cut. It’s like a high-stakes tug-of-war, and somehow, the Fed is stuck playing referee.

So, will the Fed succumb to the red-faced, vein-bulging insistence of inflation, or take a leap of faith towards the expectant trust of futures markets? Alas, only time will serve as the final whistle in this gripping economic tug-of-war.

In conclusion, the futures market dons rose-tinted glasses, still betting on a March rate cut even as inflation flexes its muscles, grinning ear-to-ear at 3.4 percent. Now, economists and investors alike perch at the border of their seats, popcorn in hand, as the Fed becomes the unwilling star in this theatric economic drama.

Original article: https://www.inman.com/2024/01/11/jump-in-key-inflation-gauge-may-delay-mortgage-rate-relief/