Core Inflation Downtick to Allow Fed to Cut in H2

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

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

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