Core inflation rises to 2.8%, why is the Federal Reserve still holding steady?

December Consumer Price Index (CPI) forecast data is out, with core inflation expected to rise from 2.6% in November to 2.8%. Against this backdrop, Nick Timiraos, a reporter for The Wall Street Journal often called the “Fed’s mouthpiece,” signaled that this CPI data is unlikely to change the Federal Reserve’s current wait-and-see stance. What does this mean? What exactly is the Fed waiting for?

The Fed’s “Wait-and-See” Is Conditional

According to the latest news, Federal Reserve officials are cautious about cutting rates and hope to see more evidence before further rate cuts, demonstrating that inflation is stabilizing and gradually declining. This stance may seem contradictory: inflation data is rising, yet the Fed says there’s no rush to cut rates. But a closer analysis reveals that this reflects the Fed’s true assessment of inflation risks.

Data Background

• The Fed has lowered the benchmark interest rate in three consecutive meetings, the most recent being December 2025
• Although inflation stopped declining last year, the Fed still took action
• December core CPI is expected to rise to 2.8%, up 0.2 percentage points from November

The True Meaning of Waiting-and-See

The Fed’s “wait-and-see” is not inaction but an assessment of a key question: Is inflation truly stabilizing? Fluctuations in monthly data are insufficient to change policy direction. Officials need to see clearer trends rather than be driven by a single data point. This demonstrates the Fed’s commitment to a data-driven policy framework.

What Evidence Is Needed to Resume Rate Cuts

According to recent reports, to resume rate cuts, Fed officials may need to see two types of new evidence:

1. Signs of deterioration in labor market conditions
2. Clear evidence of weakening price pressures

Both conditions point in the same direction: economic slowdown. In other words, the Fed is not waiting for inflation to fully subside but is assessing the overall economic situation. If the labor market remains tight and price pressures persist, continuing rate cuts could reignite inflation risks.

Policy Firmness Under Political Pressure

From related news, the Fed faces pressure not only from economic data but also from the political sphere. Kudlow criticized the investigation into Powell as a “futile effort,” and the Chair of the House Financial Services Committee called the investigation an “unnecessary distraction.” These voices indicate that the Fed’s independence is under challenge.

In this context, the significance of the Fed’s steadfast wait-and-see stance is even more profound: it is about safeguarding the central bank’s independence and its data-driven policy framework. Regardless of external pressures, the Fed remains committed to making policy decisions based on economic data rather than political preferences.

Summary

December’s CPI rose to 2.8%, but why is the Fed still holding steady? The answer is clear: the Fed is waiting for more sufficient evidence to confirm inflation stabilization and economic slowdown. This is not passive waiting but a cautious policy stance. When inflation still faces upward pressure and the labor market remains tight, rushing to cut rates could backfire. Meanwhile, in an environment with increasing political interference, the Fed’s steadfast wait-and-see approach also serves to protect its independence. For market participants, the key is to continue monitoring labor market data and subsequent CPI trends, as these will be the real triggers for the Fed to change its attitude.