Core Inflation Downtick to Allow Fed to Cut in H2
Our Privacy Policy has been updated! The Conference Board uses cookies to improve our website, enhance your experience, and deliver relevant messages and offers about our products. Detailed information on the use of cookies on this site is provided in our cookie policy. For more information on how The Conference Board collects and uses personal data, please visit our privacy policy. By continuing to use this Site or by clicking "ACCEPT", you acknowledge our privacy policy and consent to the use of cookies. 

Global Economy Briefs

Timely insights from the Economy, Strategy & Finance Center

Modest softening in consumer price inflation in December is a positive signal that underlying inflationary forces will likely continue to moderate and allow the Fed to resume rate cuts in H2. While the Consumer Price Index (CPI) is not the measure the Fed uses to guide monetary policy, it is a useful gauge for determining the direction of the Personal Consumption Expenditure (PCE) deflator, which is the Fed’s preferred inflation metric.

Core Inflation Downtick to Allow Fed to Cut in H2

January 15, 2025

Modest softening in consumer price inflation in December is a positive signal that underlying inflationary forces will likely continue to moderate and allow the Fed to resume rate cuts in H2. While the Consumer Price Index (CPI) is not the measure the Fed uses to guide monetary policy, it is a useful gauge for determining the direction of the Personal Consumption Expenditure (PCE) deflator, which is the Fed’s preferred inflation metric.

Trusted Insights for What’s Ahead®™

  • Continued health in the labor market, strong tracking for Q4 real GDP growth, and sticky core inflation suggest the Fed may delay the next rate cut until July.
  • We anticipate 25bp of cuts each in July, September and December, which would lower the federal funds rate target range to 3.50-3.75 percent by yearend.
  • This path is also consistent with our call for consumer inflation to stabilize at the Fed’s 2-percent target around mid-2026.

Figure 1. Core CPI inflation ticked down

alt=

Sources: Bureau of Labor Statistics, Bureau of Economic Analysis, and The Conference Board.

Nevertheless, despite Core Consumer Price Index (Core CPI) inf

Download Brief

Author

Yelena Shulyatyeva

Yelena Shulyatyeva

Senior US Economist

Read Bio

This publication is only available to Members. Please sign in to your myTCB® account to access it. To learn more about becoming a Member, click here. To check if your company is a Member, click here.

Sign In

Forgot your password

Create An Account

 

Keep my computer signed in

Forgot your password

Create An Account

myTCB® Members get exclusive access to webcasts, publications, data and analysis, plus discounts to events.

More From This Series

Brief

New Truce Offers Stability after US–China Trade Plummeted in 2025

November 05, 2025

Brief

Fed Signals It May Need to Pause

October 29, 2025

Brief

Fed Cut Amid Data Fog: What You Need to Know

October 28, 2025

Brief

CPI Details Give Green Light to Further Fed Rate Cuts

October 24, 2025

Brief

Rising Inflation Still Leaves Room for Fed Rate Cuts

September 26, 2025

Brief

Rising Labor Market Risks Unite the Fed to Deliver 25bps Cut

September 17, 2025