Cooling core inflation is strengthening the case for interest rate cuts, as the latest US price data points to easing price pressure across the world’s largest economy, according to the CEO of global financial advisory organization deVere Group.
The comments from Nigel Green follow Tuesday’s release of the December Consumer Price Index (CPI), which showed core inflation rising by just 0.2 percent on the month and 2.6 percent on an annual basis, both readings coming in below market expectations.
The softer outcome reinforces growing evidence that underlying inflation pressures continue to moderate. Headline inflation rose by 0.3 percent in December, with the all items annual rate holding at 2.7 percent, in line with forecasts.
While policymakers assess both measures, core inflation remains the preferred guide for long term price trends, making the data particularly significant for the direction of monetary policy.
Green says the figures underline how quickly the inflation picture has changed. “Core inflation undershooting expectations sends a powerful signal that the disinflation process is gaining traction. Keeping rates at restrictive levels when underlying price pressures are easing risks doing unnecessary damage to growth.”
The CPI data follows Friday’s employment report, which also showed signs of a softening labor market. Payroll growth slowed more than expected, while wage gains moderated, adding to the case that demand across the economy is cooling.
“The inflation data and the jobs numbers now tell the same story,” explains the deVere CEO. “Price pressures are easing and the labor market is losing momentum. Policy needs to reflect where the economy is heading, not where it’s been.”
The argument for easing now rests on three converging trends. Inflation no longer poses the same threat it did a year ago. Employment growth shows signs of fatigue. Financial conditions remain tight relative to the economic backdrop, keeping pressure on households and businesses.
“Rates remain calibrated for an inflation battle that’s largely now been won,” Green says. “Maintaining this level of restriction risks turning a slowdown into something more severe.”
Stock market futures rose following the report while Treasury yields were lower. The Federal Reserve targets inflation at 2 percent annually, so the report provides some evidence that the pace of price increases is moving back to target but remains elevated.
Shelter, a key element of stickiness, increased 0.4 percent, which was the biggest item for the monthly increase, according to the Bureau of Labor Statistics (BLS). The category accounts for more than one third of the CPI weighting and was up 3.2 percent on an annual basis.
Food prices jumped 0.7 percent for the month, though egg prices tumbled 8.2 percent and fell nearly 21 percent from a year ago after soaring previously. Other areas seeing increases included recreation, air fares and medical care. Some tariff sensitive categories including apparel also posted gains.
However, household furnishings saw a 0.5 percent decrease as President Donald Trump backed off on threatened tariff increases for imports in that sector. The 1.2 percent increase for recreation was the largest monthly gain ever for the index in data going back to 1993, the BLS said.
Higher borrowing costs continue to weigh heavily on consumers, particularly in housing, credit cards, and small business financing. While easing inflation offers relief at the checkout, tight monetary policy threatens to blunt those gains by suppressing confidence and investment.
International markets also feel the consequences of prolonged US policy restraint. Elevated rates support a stronger dollar, tighten global financial conditions, and place added strain on emerging economies carrying dollar denominated debt. A shift toward easing would help stabilize capital flows and ease pressure across international markets.
“The global economy is increasingly sensitive to US policy decisions. A move toward lower rates would support stability not only in America, but across the international financial system.”
The report likely keeps the central bank on hold at least for the moment. Policymakers cut their benchmark rate three times in the latter part of 2025, bringing it to a range of 3.50 to 3.75 percent. Markets expect them to stay on hold through the first half of 2026 as they assess the impact of the cuts on general economic conditions.
Roughly 95 percent of futures market participants expect no change in rates at the Fed’s January meeting, according to the CME FedWatch tool. The remaining sliver foresee a quarter point cut.
Tuesday’s release brings the BLS current on inflation and employment after the government shutdown last year caused a suspension of data collection and reports. The BLS did not collect survey data for October 2025 due to a lapse in appropriations, creating noise in recent inflation readings.
Investors now see the risk profile shifting. The dominant threat appears less about inflation reaccelerating and more about policy remaining too tight for too long. History shows that central banks often err by easing late rather than early, transforming manageable slowdowns into deeper downturns.
“Every cycle carries the danger of acting after the damage is done. The data now offers a chance to move before growth stalls more sharply,” concludes the deVere Group CEO.
