By News Zier Editorial Team | Reviewed and approved by Editor-in-Chief
NEW YORK — Investors are bracing for a pivotal week as fresh inflation data and ongoing tariff talks threaten to derail Wall Street’s hopes for Federal Reserve rate cuts in 2025. The benchmark S&P 500 remains about 1% below record highs, reflecting market uncertainty over President Donald Trump’s tariff plans and their potential inflationary impact.
Key Highlights
- Inflation Data in Focus:
- The Consumer Price Index (CPI) for January, due Wednesday, is expected to show a 0.3% monthly increase.
- Inflation has moderated from 2022’s 40-year highs but remains above the Fed’s 2% annual target, complicating the central bank’s rate-cutting plans.
- Tariff Concerns:
- Trump’s proposed tariffs on major trading partners, including a 10% duty on Chinese imports, are seen as inflationary and could delay Fed rate cuts.
- “Tariff uncertainty raises the hurdle for rate cuts,” said Morgan Stanley economists, who now project only one cut in 2025 (down from two).
- Fed Watch:
- Markets price in an 80% chance the Fed will hold rates steady at its March meeting, with two cuts expected by year-end (LSEG).
- Fed Chair Jerome Powell’s testimony before Congress on Tuesday and Wednesday could clarify the central bank’s stance.
Market Reactions
- Volatility Spike:
- The Cboe Volatility Index (VIX) surged to 20.42 after tariff news but has since settled around 15, reflecting easing investor anxiety.
- Earnings Boost:
- With over half of S&P 500 companies reporting, Q4 2024 earnings are on track to grow 12.7% year-over-year, up from an initial estimate of 9.6%.
Expert Insights
- Charlie Ripley, Allianz Investment Management:
- “Inflation is the wildcard for 2025. Higher inflation reduces the Fed’s ability to cut rates, and markets don’t like that.”
- Art Hogan, B. Riley Wealth:
- “We don’t want to see CPI heating up again. That would raise concerns about the Fed holding rates steady longer than expected.”
- Lawrence Gillum, LPL Financial:
- “Tariff threats have revived market volatility early in the second Trump administration.”
What’s Next?
- CPI Release: Wednesday’s data could trigger market volatility, especially if inflation exceeds expectations.
- Earnings Reports: Results from Coca-Cola, Cisco, and McDonald’s will provide insights into consumer and corporate health.
- Fed Testimony: Powell’s remarks before Congress will be closely watched for clues on future rate cuts.
News Zier Analysis
Why This Matters:
- Inflation vs. Tariffs: Rising prices and trade barriers could stall economic growth, forcing the Fed to maintain higher rates.
- Investor Sentiment: Strong earnings have buoyed stocks, but tariff uncertainty and inflation risks loom large.
- Global Impact: U.S. monetary policy and trade decisions have far-reaching implications for global markets.
Stay with News Zier for updates on inflation, tariffs, and Fed policy.
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