Bankinter | The CPI surprised on the upside in January. The headline rate moderated more than expected to 2.4% (-0.3pp), while the core rate of 2.5% (-0.1pp) was in line with expectations.
Bankinter analysis team’s view: The good performance of inflation allows for a dovish/loose monetary policy by the Fed, whose reference rate is currently in the 3.50% / 3.75% range. Despite this, the strength of recent labour market data (non-farm job creation of 130,000 in January against 65,000 expected) and positive surprises in GDP growth lead us to project two rate cuts in 2026 (versus two previously and the possibility of an additional one), with the timing pointing towards June and September (versus March and June previously). The Fed will remain ‘data dependent’. From May onwards, Warsh will take over at the helm of the Fed (end of Powell’s term), who may be more ‘proactive’ in lowering rates.
