What Americans can expect from inflation in 2025

The Street

Kevin Nicholson, Chief Investment Officer of Global Fixed Income at Riverfront Investment, joins TheStreet to share his thoughts on what we might see on the inflation-front in 2025.

Transcript

00:00So tell me about the Federal Reserve, what do you expect to see from the Federal Reserve in 2025?

00:06I mean, the market seemed to be ahead of the Fed in 2024 and 2025.

00:13What do you expect to see in terms of how low the Fed will go?

00:21Well, first of all, I think in 2025, it's important to remember, I think that the

00:26Fed will be slower to lower than the market expects. And even though the Fed started

00:33their rate cuts in September with a big bang, I think that they're going to now

00:37start to slow those down and be more data dependent, largely because the economic growth

00:43has continued in light of them cutting rates. And so what the Fed doesn't want to do is to

00:51induce further inflation and inflation moving higher. So I think that what we will see in 2025

00:58is that the Fed will ultimately get they will end the year with the Fed funds rate around three and

01:07seven, eight. And so I think that the neutral rate is actually going to be higher than what

01:14the market is actually expecting at the moment. So three and seven eighths would be about a drop

01:23of a full percentage point drop. Yeah, roughly in 2025. And so we've been hearing more chatter

01:32or more fear that inflation is going to roar back in 2025 and become a problem.

01:37What's your thinking on inflation?

01:43Well, as of right now, inflation has been stickier than everyone has thought. And if you add tariffs

01:51into the mix, that means that, you know, goods may end up costing more, especially if there is

02:01retaliation from these other countries that we place tariffs on. So overall, I think that inflation

02:09is going to be more sticky than everyone expects. And therefore, it's going to force yields higher.

02:18And ultimately, we will see the Fed pause.

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