Inflation Moves In The 'Right Direction' But Forecast Is Hazy, Economist Says

February's Consumer Price Index report released Wednesday came in cooler-than-expected and bolstered Wall Street's expectations for rate cuts in the months ahead. Here's a look at economists' reactions to the latest inflation data.  

What To Know: Headline inflation eased slightly to 2.8% year-over-year, and core CPI, which strips out food and energy prices, slowed to 3.1%. Following the inflation print, traders fully priced in three Federal Reserve rate cuts in 2025, according to the CME FedWatch Tool.

Read Next: Mortgage Applications Soar As Rates Hit Lowest Level Since October

Expert Ideas: Bill Adams, chief economist for Comerica Bank, said that inflation is moving in the "right direction," making it more likely that the Fed will cut rates. Comerica forecasts a single 0.25% interest rate cut in 2025, likely occurring in July.

However, the Fed forecast is hazy given the uncertainty surrounding future Trump administration policies. 

"The range of outcomes feels wider than usual given the unpredictability of the policies affecting prices and the job market," Adams said. 

Chris Zaccarelli, chief investment officer for Northlight Asset Management, also highlighted the increased economic and geopolitical uncertainty and pointed to the lower rate of inflation, which allows the Fed to support a struggling economy with rate cuts if needed.

"If all of these policy changes lead to a weaker dollar, an increase in geopolitical uncertainty, and a loss of the exorbitant privilege of having the world’s reserve currency, then many of the lessons that investors have learned over the previous eight decades will need to be forgotten," Zaccarelli warned. 

While markets were relieved with the cool inflation report on Wednesday, price increases following the pandemic have added up over the past five years. Charlie Bilello, chief market strategist for Creative Planning, featured a list on social media showing U.S. home prices up 52.3% and auto insurance 55.4% higher.

Price Increases over last 5 years…
CPI Medical Care: +12.3%
CPI New Cars: +20.3%
CPI Shelter: +26.6%
CPI Food at home: +27.4%
CPI Gasoline: +27.6%
CPI Food away from home: +30.1%
CPI Electricity: +32.7%
CPI Used Cars: +35.1%
CPI Transportation: +36.2%
CPI Fuel Oil: +41.9%
CPI…

— Charlie Bilello (@charliebilello) March 12, 2025

Market Reactions: U.S. markets were mixed in late morning trading with the SPDR S&P 500 ETF Trust SPY, tracking the S&P 500, flat at $555.92 and the Invesco QQQ Trust QQQ, tracking the Nasdaq 100, up 0.47% at $473.81. 

The benchmark 10-year yield rose slightly to 4.29%. The SPDR Gold Trust GLD, tracking the price of gold, rose 0.17% to $269.61. 

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