Inflation for December remains sticky, with core consumer prices rising less than forecast at 2.6%, near the Fed’s 2% target. Analysts say this won’t prompt rate cuts. Shelter costs, offsetting tariffs, may be overstated in the report, affecting comparisons to October and November data.

New York Fed president expects inflation to peak in the first half of 2026 before falling to just under 2.5% by year-end. He sees tariffs having one-off effects on prices. Fed officials note they are close to a neutral level on benchmark rates, likely to hold steady for now.

St. Louis Fed president agrees rates are near neutral and doesn’t see a need for further cuts. He cautions against bringing policy into accommodative territory. With little evidence of accelerating inflation, he stresses the need to monitor risks and maintain a strong economy.

A Justice Department investigation into Fed Chair Jay Powell could introduce uncertainty into rate decisions. Analysts predict policymakers may lean hawkish for institutional independence. The probe may also influence Powell’s future on the Board beyond his term as Chair in mid-2026.

Read more at Yahoo Finance: New inflation reading likely to keep Fed on hold this month