Economists say U.S. disinflation progress to stall in 2025

NEW YORK, Jan. 13 (Xinhua) -- The progress in driving down U.S. inflation should stall in 2025 given expected changes to trade, fiscal and immigration policies, according to economists with Bank of America (BofA) Global Research.

"We do not see substantial upside risks to inflation but remain cautious of the recent robust labor market data and increased inflation expectations," said Stephen Juneau and Jeseo Park, economists with BofA Global Research in a note issued on Monday.

The imposition of tariffs could lead to higher inflation, with a bias toward the goods sector, according to a recent survey of fundamental analysts conducted by BofA Global Research.

U.S. inflation in December 2024 is expected to remain largely unchanged with headline consumer price index (CPI) and core CPI increasing by 2.8 percent and 3.3 percent year on year, respectively, according to Juneau and Park.

U.S. headline CPI in November 2024 rose 2.7 percent year on year with core CPI in the month up 3.3 percent year on year, according to data issued by U.S. Bureau of Labor Statistics. Meanwhile, U.S. personal consumption expenditures (PCE) year-on-year inflation edged up to 2.4 percent in November 2024 with core PCE year-on-year inflation unchanged at 2.8 percent.

The U.S. Federal Reserve will raise interest rates if core PCE inflation exceeds 3 percent annually and longer-term inflation expectations become unanchored, according to BofA Global Research.

"Investors should not count on further significant slowing in inflation," said Steven Wieting, chief economist and investment strategist at Citi Wealth.

Factors contributing to inflation include increases in food and gasoline prices. A bird flu outbreak has caused egg shortages, driving up prices, with some grocery stores imposing purchase limits.

The U.S. CPI report for December 2024 will be released on Wednesday.