SFS Insights

·        Headline inflation fell in December, pushing the annual rate down to 6.5%, the lowest since October 2021.

·        The weakening trend of inflation should convince the Federal Reserve (Fed) to further downshift the pace of rate hikes in the upcoming meeting.

·        The Fed will likely hike rates by 0.25% on February 1st. The labor market must significantly cool before the Fed could appease markets by cutting rates the latter half of this year.



·        Our base case is the economy will slow enough for the Fed to consider cutting rates sometime in the second half of this year.

PCE- Personal Consumption Expenditures

Calculations from the Fed show that the contribution from demand to inflation has been shrinking in recent months, see chart above. The implication is that monetary policy is sufficiently tight and the Fed is quickly approaching the peak in the Fed funds rate. In other words, these Fed estimates show that the cumulative Fed hikes seen so far are enough to have successfully cooled down demand inflation, and the tentative conclusion is that no additional demand destruction is needed. 

Robert Schermerhorn, CFP® 

Jamie Usas, CFP®

Operations Manager

Amanda Friedman

Wealth Consultant

Andrew Chapman, CFP®

Operations Research Associate

Lauren Bliss

Office Coordinator

Saratoga Financial Services

18 Division Street, Suite 305

Saratoga Springs, NY 12866

Phone: (518) 584-2555

www.SaratogaRetire.com

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