Disinflation Continues, but Trade Risks Loom
Home

Disinflation Continues, but Trade Risks Loom

Time to read: Minutes
Barbara Reinhard

Barbara Reinhard, CFA

Senior Managing Director, Chief Investment Officer, Multi-Asset Strategies and Solutions

Skyscrapers and traffic in city

The latest Consumer Price Index (CPI) report shows that headline inflation cooled more than expected, dropping to 2.8% year over year in February from 3.0% in January, slightly below the anticipated 2.9%. Core CPI, which excludes food and energy, also declined to 3.1% year over year, marking the smallest gain since April 2021. Markets welcomed the news, with major indexes opening higher on Wednesday in response. 

While this disinflationary trend is encouraging, the broader economic outlook remains uncertain. Ongoing trade tensions and potential tariff implementations by the current administration could rekindle inflationary pressures in the coming months, complicating the Federal Reserve’s monetary policy decisions. Recession risks are on the radar after the Atlanta Fed’s GDPNow model, which offers a real-time estimate of economic growth, remained in negative territory at -2.4% for the first quarter of 2025. 

The Federal Reserve has kept the federal funds rate at 4.25-4.50% since December 2024, pausing its rate-cutting cycle after three consecutive reductions. However, markets remain optimistic and are currently pricing in three additional rate cuts by the end of 2025. We continue to monitor the disinflation trend and its impact on stocks and bonds. While the latest inflation data supports a bullish outlook, the potential disruptions from trade policy introduce an element of caution. 

Maverick Lin contributed to this article. S&P and other market data from Bloomberg.

Tags:
Global Perspectives

Related Insights

Investing in a Turbulent Policy Environment

March 10, 2025

With 4Q24 earnings on track to grow 17%, and 10 out of 11 sectors delivering positive performance, our portfolios are currently in base positioning.

IM4315139

Voya Investment Management has prepared this commentary for informational purposes. Nothing contained herein should be construed as (i) an offer to sell or solicitation of an offer to buy any security or (ii) a recommendation as to the advisability of investing in, purchasing or selling any security. Any opinions expressed herein reflect our judgment and are subject to change. Certain of the statements contained herein are statements of future expectations and other forward-looking statements that are based on management’s current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Actual results, performance or events may differ materially from those in such statements due to, without limitation, (1) general economic conditions, (2) performance of financial markets, (3) interest rate levels, (4) increasing levels of loan defaults (5) changes in laws and regulations and (6) changes in the policies of governments and/or regulatory authorities. Past performance is no guarantee of future returns. The opinions, views and information expressed in this commentary regarding holdings are subject to change without notice. The information provided regarding holdings is not a recommendation to buy or sell any security. Strategy holdings are fluid and are subject to daily change based on market conditions and other factors.

Top