December's inflation report showed prices holding steady, a result markets deemed “good enough” but too hot for an immediate Federal Reserve rate cut. As the central bank appears set to stand firm, prominent strategist Charlie Bilello is defending its stance against intensifying political pressure, labeling outside interference as dangerous “price fixing.”

Steady Prices, Lingering Risks

The Consumer Price Index (CPI) rose 2.7% year-over-year in December, unchanged from the prior month. While core services inflation excluding housing—known as “super core”—softened to 2.76% from previous highs, the monthly rate remains “a bit too hot,” according to Jeffrey Roach, Chief Economist for LPL Financial.

Roach argues the Fed will likely pause rate adjustments this month, with conditions potentially warranting a cut by April as economic risks shift toward a weakening labor market. Eric Teal, Chief Investment Officer for Comerica Wealth Management, expects inflation to remain range-bound between 2.2% and 2.7%.

Defending Fed Independence

The data reinforces market expectations that the Fed will leave interest rates unchanged at its Jan. 28 meeting. Bilello, Chief Market Strategist at Creative Planning, argues this is the “right decision,” despite anticipated complaints.

Amid rising political pressure on the Fed to lower borrowing costs to boost the economy, Bilello asserted that rates should be determined by the free market, not presidential pressure.

‘Price Fixing’ Warning

Bilello warned that when interest rates are set by political forces rather than supply and demand, it constitutes “price controls,” which he argues lead to misallocated capital, asset bubbles, and extreme boom-bust cycles.

“There’s going to be a lot of people complaining in 2 weeks when the Fed doesn’t cut rates. Let them,” Bilello wrote. “Price controls don't work – whether it's rent, oil, or interest rates.”

No Rate Cuts In January

The CME Group's FedWatch tool‘s projections show markets pricing a 97.2% likelihood of the Federal Reserve leaving the current interest rates unchanged in January.

The SPDR S&P 500 ETF Trust (NYSE:SPY) and Invesco QQQ Trust ETF (NASDAQ:QQQ), which track the S&P 500 index and Nasdaq 100 index, respectively, closed lower on Tuesday. The SPY was down 0.20% at $693.77, while the QQQ declined 0.15% to $626.24, according to Benzinga Pro data.

The futures of the S&P 500, Nasdaq 100, and Dow Jones indices were trading lower on Wednesday.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

Photo Courtesy: MDart10 on Shutterstock.com