Fed Is in Right Place Now to Respond to News: Vincent Reinhart

Asian equities experienced gains following the release of US inflation data, which indicated a cooling trend, thereby strengthening the case for potential interest-rate cuts by the Federal Reserve. This positive sentiment also contributed to a rise in American stocks, alleviating previous concerns in the tech sector.

U.S. inflation slowed to 2.7% in November, as reported by the Consumer Price Index, although data collection issues related to a government shutdown have distorted the findings, raising concerns among economists about the accuracy of the report.

The S&P 500 index ended its losing streak on Thursday, buoyed by a cooler-than-expected inflation report that raised expectations for further interest rate cuts by the Federal Reserve. Additionally, a rebound in the tech sector contributed positively to market sentiment, reflecting a shift in investor confidence.

U.S. stock and bond markets rallied following a significant drop in inflation, as the Consumer Price Index (CPI) indicated a cooling trend, which has led to increased optimism for potential Federal Reserve rate cuts in 2026. This development has provided a boost to market sentiment, encouraging investors to re-enter the market.

The Federal Reserve has cut its benchmark federal funds rate by a quarter point during its December meeting, marking the third cut of 2025 and reducing the target range to approximately 3.5% to 3.75%. This decision comes amidst a backdrop of rising mortgage rates and declining demand in the housing market, raising concerns about the effectiveness of the rate cut.

The selection process for the next chair of the Federal Reserve is nearing completion, with the successor to Jerome H. Powell facing a significant credibility challenge. The new chair will inherit a complex economic landscape marked by internal divisions within the Fed regarding monetary policy and interest rates.