Inflation Rises Again: May Be 'End Of The Road' For Interest Rate Cuts, Expert Says

The Personal Consumption Expenditures price index, the Federal Reserve's preferred inflation measure, rose 2.6% in December 2024, according to data released Friday. While the data were in line with expectations, it marks the third consecutive increase in annual PCE inflation, following a low of 2.1% in September last year. 

Expert Ideas: Fed Governor Michelle Bowman delivered remarks after the print on Friday and said she thinks the Fed should wait for more evidence of easing inflation before making additional rate cuts. 

"There is still more work to be done to bring inflation closer to our 2 percent goal. I would like to see progress in lowering inflation resume before we make further adjustments to the target range," Bowman said in remarks, as reported by CNBC. 

"I do expect that inflation will begin to decline again and that by year-end, it will be lower than where it now stands," Bowman added. 

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Joseph Brusuelas, chief economist at RSM, noted the "slow progress" towards the Fed's target rate of 2% and said policymakers will be looking for easing in rents and service inflation specifically before making another rate cut. 

"It looks increasingly likely that we may have reached the end of the road on the Fed's current rate cutting campaign," Brusuelas said. 

Mohamed El-Erian, chief economic advisor at Allianz, also highlighted the "stickiness" reflected in some of the Federal Reserve's favorite economic indicators. 

"The numbers are consistent with the view that inflation remains sticky above the Fed’s target, and is likely to remain so," El-Erian wrote in a social media post.

Markets React: All major U.S. indices are up on Friday with the SPDR S&P 500 ETF Trust (NYSE:SPY),  tracking the S&P 500, up 0.65% at $608.97 and the Invesco QQQ Trust (NASDAQ:QQQ), tracking the Nasdaq 100 index, up 1.28% at $529.78 at the time of publication. 

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Image created using artificial intelligence via Midjourney.