US December CPI Inflation Test 2026: Fed Rate Path at a Crossroads

The Fed's next move hinges on a single number. According to Reuters, global investors are on high alert as the US December CPI report is set to be released. This data will serve as a critical test for the Federal Reserve as it navigates an internal row over the timing and pace of interest rate cuts in 2026.

US December CPI Inflation Test 2026 and Fed Policy

There's a growing divide within the Fed. While some officials see enough evidence that inflation is cooling toward the 2% target, others remain cautious about the resilient labor market and its potential to reignite price pressures. Analysts expect the December headline inflation to land near 3.1% year-over-year, a figure that could either validate the current pivot narrative or force a hawkish rethink.

Market Scenarios: Bulls vs. Bears

• In-line with expectations: Expectations for a March rate cut will likely firm up, potentially fueling a relief rally in equities.
• Upside surprise: A hotter-than-expected print would likely send Treasury yields higher and strengthen the US Dollar as the 'higher for longer' narrative returns.