Fed Official Expresses Caution About Inflation’s Direction

As investors pine for more rate cuts, Federal Reserve Governor Adriana Kugler says that while the US economy ended the year in a good place, she’d like to confirm inflation is again on a downward path. Sure, price pressures have eased significantly since the pandemic and the central bank’s soft landing remains in play. But progress toward its 2% target has been choppy of late. Fed officials capped 2024 with a quarter-point interest-rate cut and new economic projections signaling just two rate reductions in 2025. Chair Jerome Powell has indicated further adjustments will depend on the trajectory of inflation. Kugler told CNBC Friday that the labor market is resilient, emphasizing that cooling has been gradual. The unemployment rate—which ticked up to 4.2% in November—remains historically low. The wild card of course is what Donald Trump does when he takes office, specifically if and by how much he follows through on his tariff threats.

The Santa Claus rally appears to have been a no-show, but at least Wall Street ended the week with a little cheer. Investors were finally induced to buy the dip after a five-day drop shaved more than a trillion dollars off share prices. The Nasdaq 100 climbed 1.7% while the S&P 500 rose 1.3%. Data showed US manufacturing rose at a modest pace in the final month of 2024. The Institute for Supply Management’s gauge hit 49.3, topping estimates, but remained below 50, a level that indicates economic expansion. New orders rose to the highest since the start of last year. Here’s your markets wrap.