“When you step back and look at the overall state of inflation, we’re not really going anywhere,” said Sarah House, senior economist at Wells Fargo. “While there has been progress, the pace has been really disappointing.”
Even before Wednesday’s data, officials at the Fed had voiced increasing concern about the slow progress on inflation. At the same time, the continued strength of the labor market — including data released last week showing unexpectedly strong job growth in December — has made policymakers less worried that their efforts to rein in price increases were leading to layoffs or causing damage to the broader economy.
As a result, investors widely expect the central bank to hold interest rates steady at its meeting later this month. That would break a streak of three consecutive rate cuts, and some forecasters now say that policymakers may not lower rates at all this year.
“With a labor market that’s stabilizing, with inflation already above target and with risks further to the upside, I think it’s difficult to make a case to keep cutting,” said Aditya Bhave, an economist at Bank of America.
Most Fed officials have said they still expect inflation to cool gradually, and economists agree that there’s reason to be optimistic. Data released on Tuesday showed that wholesale prices rose more slowly in December.
