Fears of elevated interest rates dampened the mood on Wall Street at the start of this year–but cooling core inflation and dovish comments by Federal Reserve governor Christopher Waller have given investors reason to feel a bit more cheerful this week.

Inflation is proving stickier than expected, which could cause Fed to hit pause button on more interest rate cuts.

Due to the stronger-than-expected jobs report, Bank of America economists revised the Fed outlook for this year: “We no longer expect any additional rate cuts,” economists wrote in a report on Monday. "Inflation is stuck above target, with risks skewed to the upside, activity is strong, and the labor market now appears to have stabilized."

The US Federal Reserve could cut rates three or four times this year if inflation data cooperates, with a first cut possible before July, a senior bank official said Thursday.

As mentioned, mortgage rates haven't fallen in line with the Fed's rate cuts because they depend on factors beyond the agency's benchmark rate, such as the economy and 10-year Treasury bond yields. For example, when the 10-year treasury rate goes up, mortgage rates tend to follow, and vice-versa.

Consumer Price Index showed an acceleration to 2.9%, the highest rate since July. With such high inflation, the Fed is unlikely to cut rates in January.

Financial markets are still concerned about inflation. The Fed influences short-term interest rates, which are falling, but longer-term bonds like the 10-year Treasury are a better reflection of inflation expectations.

Annual inflation ticked up for a third straight month in December as food, energy costs rose, CPI report showed. But underlying price measure eased.

Federal Reserve officials at their meeting Dec. 17-18 expected to dial back the pace of interest rate cuts this year in the face of persistently elevated inflation and the threat of widespread tariffs and other potential policy changes.

A fter several months of hopeful signs in the battle against inflation, new data confirms that the fight is far from over. Inflation rose 2.9% on an annual basis in December, whic

Federal Reserve policymakers may be able to reduce interest rates a couple of times this year, traders bet on Wednesday, after a government report helped allay fears that inflation was accelerating in the final full month of Joe Biden's presidency.