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Inflation report to provide critical insight into America’s main economy concern
(MENAFN) An inflation report set to be released on Wednesday will provide critical insight into the issue that many Americans cite as their primary economic concern. The report comes just days before the inauguration of President-elect Donald Trump, making it a timely update on the state of the economy. This follows a stronger-than-expected jobs report last week, which revealed robust hiring in December. The report caused turbulence in the financial markets, with the stock market falling and bond yields surging, as investors speculated that the Federal Reserve might postpone long-anticipated interest rate cuts.
Economists predict that inflation rose by 2.9 percent in December compared to the same month a year ago, an increase from the 2.7 percent annual inflation rate recorded in November. While inflation has significantly slowed from its peak of over 9 percent in June 2022, it remains above the Federal Reserve's target rate of 2 percent. If these predictions hold true, the December inflation rate will represent the fastest pace of price increases since July, marking a reversal of the declining trend seen in earlier months.
The Federal Reserve eased its aggressive approach to combating inflation in the final months of last year, reducing interest rate hikes by a full percentage point. However, interest rates remain historically high, ranging between 4.25 percent and 4.5 percent. Any acceleration in inflation could prompt the Fed to reconsider its timeline for cutting rates later this year. Policymakers are concerned that persistent inflation could worsen if rates are reduced prematurely, potentially complicating efforts to stabilize prices.
The Fed has already signaled its unease about the renewed acceleration of inflation observed in late 2024. In response, it recently revised its outlook for 2025, projecting fewer rate cuts than initially planned. This adjustment reflects a growing concern among policymakers that inflation may prove more resistant to control than previously anticipated.
Economists predict that inflation rose by 2.9 percent in December compared to the same month a year ago, an increase from the 2.7 percent annual inflation rate recorded in November. While inflation has significantly slowed from its peak of over 9 percent in June 2022, it remains above the Federal Reserve's target rate of 2 percent. If these predictions hold true, the December inflation rate will represent the fastest pace of price increases since July, marking a reversal of the declining trend seen in earlier months.
The Federal Reserve eased its aggressive approach to combating inflation in the final months of last year, reducing interest rate hikes by a full percentage point. However, interest rates remain historically high, ranging between 4.25 percent and 4.5 percent. Any acceleration in inflation could prompt the Fed to reconsider its timeline for cutting rates later this year. Policymakers are concerned that persistent inflation could worsen if rates are reduced prematurely, potentially complicating efforts to stabilize prices.
The Fed has already signaled its unease about the renewed acceleration of inflation observed in late 2024. In response, it recently revised its outlook for 2025, projecting fewer rate cuts than initially planned. This adjustment reflects a growing concern among policymakers that inflation may prove more resistant to control than previously anticipated.
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