Don't hold your breath waiting for a Federal Reserve interest rate cut this month. The consumer price index rose 0.3% month over month and 2.7% year on year in December, matching Dow Jones consensus estimates. The core CPI, which strips out food and energy prices, climbed 0.2% month over month, less than expected. The report first sent stock futures higher , as traders saw the news as supportive of a potential Fed rate cut in the final week of January. But the initial excitement quickly wore off, with futures trading back around little changed. Many on Wall Street pointed out that, while the December CPI report shows inflation is trending lower, the labor market remains pretty static — which may dissuade the Fed from lowering its benchmark rate. "As inflation has taken a backseat to the employment figures, today's data was unlikely to shift the January Fed pause pricing," said Ian Lyngen, head of U.S. rates at BMO. The CME Group's FedWatch tool shows a 95% certainty in the fed funds futures market that the Fed keeps its overnight rate in a 3.5%-3.75% range at its first policy meeting of the year in two weeks. Here's what others on the Street had to say: Bret Kenwell, U.S. investment analyst at eToro: "December's in-line CPI report may not be enough to move the Fed's view toward a more aggressive rate-cutting policy. But as a cooling jobs environment persists, inflation may not be as much of a constraint when it comes to interest rate policy." Sonu Varghese, global macro strategist at Carson Group: "We're still unlikely to get another cut from the Federal Reserve in Q1 thanks to more solid labor market data in December, including lower unemployment. Still, the lower inflation print will allow the Fed to continue focusing on labor market risks." Art Hogan, chief market strategist at B. Riley Wealth: "We got a modicum of good news with today's CPI report, which was milder than anticipated in December. While the Headline number was in line with estimates at 2.7%, the Core came in a tick cooler at 2.6%, versus an estimate of 2.7%. This should give the Fed some breathing room to cut rates in Q1 if the trend continues." Alexandra Wilson-Elizondo, Global Co-CIO of Multi-Asset Solutions at Goldman Sachs Asset Management: "Ultimately, the data reinforces the Goldilocks environment. That said, inflation prints are likely to shift from being a primary market trigger to more of a background constraint as the market becomes increasingly focused on the risks to Federal Reserve independence. We continue to like being long risk, avoiding the news treadmill and positioning instead for durable, tradeable themes." Ryan Weldon, portfolio manager at IFM Investors: "The firmer December CPI data signaled broad-based upward price pressures across goods and services and underscored the stubbornness that has kept inflation persistently above the Fed's 2% target. The inflation print viewed alongside the firmer December jobs data will support the Fed holding rates as they assess the state of the economy following the government shutdown disruption. The next several months should prove volatile as pressure from the administration mounts ahead of a new Fed chair appointee expected in May." Skyler Weinand, chief investment officer at Regan Capital: "Tuesday's CPI was in-line with expectations and that will likely keep the Federal Reserve on pause when it comes to interest rates for the foreseeable future. After cutting rates three times in the fall of 2025, the Fed is likely to take its time and absorb more data, especially given the noise we've seen in the recent data as a result of the government shutdown. Recent positive employment data, elevated inflation, sticky price levels and political noise will keep the Fed at bay through at least the Spring." Ellen Zentner, chief economic strategist for Morgan Stanley Wealth Management: "We've seen this movie before — inflation isn't reheating, but it remains above target. There's still only modest pass-through from tariffs, but housing affordability isn't thawing. Today's inflation report doesn't give the Fed what it needs to cut interest rates later this month." — CNBC's Alex Harring, Yun Li and Michelle Fox contributed reporting.
