Recent data is supplying the evidence needed to land the argument. At present, inflation expectations are coming in above the target of 2%, but not as hot as economists feared. The Bureau of Labor Statistics (BLS) reported Friday that the consumer price index increased 0.2% in January on a seasonally adjusted basis, bringing the year-over-year increase to 2.4%. That annual rate is the lowest it’s been since June 2025, suggesting Trump’s tariffs haven’t provided the one-off spike in prices that many consumers feared.
Likewise, while the January jobs report came in better than expected (adding 130,000 roles with the unemployment rate remaining stable), market sentiment is that this rosier report doesn’t signal a change in the underlying base case: The labor market remains in a low-hire, low-fire environment. This would support an argument to cut because inflation is relatively steady (one part of the Fed’s mandate), while employment (another part) is showing signs of weakness, which a base rate cut could help address.
But minutes from the latest Federal Open Market Committee (FOMC) meeting suggest some members aren’t simply resistant to cutting, they’re open-minded about hiking the interest rate if they deem conditions justify the action.
