United States inflation cooled to its lowest level in eight months in January, prompting a prominent financial advisory executive to call for the Federal Reserve to reduce interest rates at its March meeting, even as market expectations suggest policymakers will maintain current levels.
The Consumer Price Index (CPI) rose 2.4 percent annually in January, down from 2.7 percent in December and below the 2.5 percent forecast by economists surveyed by Dow Jones, the Bureau of Labor Statistics (BLS) reported Friday. Core inflation, which excludes volatile food and energy prices, declined to 2.5 percent, the lowest reading since March 2021.
Nigel Green, chief executive officer of deVere Group, an international financial advisory firm, argued the data creates clear justification for the Federal Reserve to cut interest rates when the Federal Open Market Committee (FOMC) meets March 17 through 18.
Price growth has moderated for four consecutive months, with headline inflation retreating from just above 3 percent in September. On a monthly basis, the CPI increased 0.2 percent in January, below the 0.3 percent forecast, while core prices rose 0.3 percent.
Green emphasized that real interest rates remain restrictive relative to current inflation levels. The federal funds target range currently stands between 3.5 percent and 3.75 percent, following three consecutive cuts in late 2025.
Policy is still restrictive in real terms, with borrowing costs materially higher than underlying inflation, Green stated. The stance was appropriate when inflation was surging, but it is increasingly misaligned with present conditions.
The deVere executive warned that maintaining elevated rates for too long risks overtightening the economy. Interest-sensitive sectors, including housing and business investment, continue operating under elevated financing costs, he noted.
Despite the improving inflation picture, Federal Reserve officials appear inclined to hold rates steady at the March meeting. CME FedWatch Tool data shows traders pricing in an 88 percent probability of no change, with only 11 percent expecting a cut to the 3.25 percent to 3.5 percent range.
The Federal Reserve held rates unchanged at its January 28 meeting, pausing after the series of cuts delivered between September and December. Two committee members dissented, voting for a quarter-point reduction.
Federal Reserve Chair Jerome Powell indicated at the January press conference that policymakers would make decisions on a meeting-by-meeting basis. Powell noted it was hard to look at the data and conclude that policy is significantly restrictive right now.
Green acknowledged the central bank’s cautious approach but maintained that incoming data now support easing. Federal Reserve officials remain sensitive to the perception of easing prematurely, particularly with inflation still above the 2 percent target, he observed.
However, credibility is also strengthened by responding appropriately to incoming data, and the numbers now support a rate cut, Green added.
The January inflation report showed energy prices falling 0.1 percent annually after rising 2.3 percent in December, with gasoline down 7.5 percent. Shelter costs rose 3 percent year-over-year, down from 3.2 percent in December, despite accounting for more than one-third of the overall index.
Food prices increased 3.1 percent annually, up slightly from 2.9 percent in December. Specific categories remain elevated, with ground beef up 17.2 percent and coffee rising 18.3 percent, though egg prices fell more than 34 percent from year-ago levels.
Bond markets are already factoring in the likelihood of easing later this year, Green noted. Equity investors understand that inflation near 2.4 percent reduces the risk of further tightening.
Acting sooner rather than later would reinforce stability rather than undermine it, he concluded.
The Bureau of Labor Statistics noted that data collection was affected by the October 2025 government shutdown, which interrupted normal survey procedures. Economists have indicated this may introduce a slight downward bias in inflation readings through April 2026.
