{"id":47972,"date":"2026-02-23T07:00:03","date_gmt":"2026-02-23T07:00:03","guid":{"rendered":"https:\/\/www.vtmarkets.com\/?p=38957"},"modified":"2026-02-23T07:00:03","modified_gmt":"2026-02-23T07:00:03","slug":"shifting-fed-cut-expectations-following-us-cpi","status":"publish","type":"post","link":"https:\/\/www.vtmarkets.com\/en-asia\/week_ahead\/shifting-fed-cut-expectations-following-us-cpi\/","title":{"rendered":"Week Ahead: Shifting Fed Cut Expectations Following US CPI"},"content":{"rendered":"\n

This week\u2019s macro landscape is defined by a tension between easing headline inflation and persistent core price pressures.<\/p>\n\n\n\n

US CPI for January slowed to 2.4% year on year, coming in below the 2.5% forecast and down from 2.7% in December. Softer energy costs, particularly lower petrol prices, contributed to the decline in the headline figure.<\/p>\n\n\n\n

Beneath the surface, however, inflation remains less reassuring. The Federal Reserve\u2019s preferred measure, December\u2019s PCE index, stands at 2.9% year on year, with core PCE at 3.0%. Services inflation and other essential costs continue to run firm, keeping policymakers cautious about easing policy prematurely.<\/p>\n\n\n\n

Labour market data paints a similarly mixed picture. January Non-Farm Payrolls rose by 130,000, comfortably above expectations of around 70,000<\/a> and significantly higher than December\u2019s revised 48,000 reading.<\/p>\n\n\n\n

At the same time, earlier benchmark revisions showed that employment figures throughout 2025 had been overstated, aligning with VT Markets\u2019 research highlighting a gradual softening in the jobs market.<\/p>\n\n\n\n

Minutes from the Fed and recent official commentary<\/a> underscore a guarded approach. Policymakers describe progress towards the 2% inflation target as uneven and emphasise that any rate reductions will remain data-dependent, while some still point to the possibility of further tightening should inflation stall.<\/p>\n\n\n\n

Fed funds futures and FedWatch indicators now imply a strong likelihood of rates remaining unchanged through the March meeting, with markets increasingly anticipating the first cut around mid-2026 rather than earlier in the year.<\/p>\n\n\n\n

The Tariff Twist<\/h2>\n\n\n\n

A significant development followed the US Supreme Court\u2019s ruling that the authority to impose broad-based tariffs lies with Congress rather than the President.<\/p>\n\n\n\n

The judgment removes a key executive policy instrument and could result in approximately $160 billion in refunds to importers.<\/p>\n\n\n\n

For financial markets, this development carries two primary implications:<\/p>\n\n\n\n

1. USDX impact: The unwinding of tariff-related inflows may weigh on the dollar if importers reverse earlier currency hedges.<\/p>\n\n\n\n

2. S&P 500 effect: Reduced effective import costs could help stabilise corporate margins and support forward earnings expectations.<\/p>\n\n\n\n

Nonetheless, the White House is reportedly considering a 150-day Emergency Surcharge as an interim measure. Market participants will be monitoring whether such a proposal withstands legal scrutiny.<\/p>\n\n\n\n

Escalating US\u2013Iran Tensions And The Geneva Deadline<\/h2>\n\n\n\n

Washington has issued a 48-hour ultimatum to Iran, demanding agreement to a revised framework ahead of Thursday\u2019s meeting in Geneva.<\/p>\n\n\n\n

\n

Iranian Foreign Minister Abbas Araghchi said he\u2019s likely to meet US special envoy Steve Witkoff Thursday in Geneva, seeking a diplomatic resolution for the latest standoff over Tehran\u2019s nuclear program. https:\/\/t.co\/3DlCFu6A3c<\/a><\/p>— Bloomberg (@business) February 22, 2026<\/a><\/blockquote>