Core inflation has gone sideways year-over-year in 2025, says Goldman Sachs' Hatzius

Economic Indicators - The recent CPI print was lighter than expected, influenced by the government shutdown, raising questions about its reliability [1] - Core CPI showed an average increase of eight basis points in October and November, but there are uncertainties, particularly regarding shelter numbers [2] - Core inflation appears to be stabilizing or slightly decreasing year-on-year, indicating improving underlying trends despite tariff impacts [3] Federal Reserve Policy - The inflation rate of 2.7% and unemployment rate of 4.6% are both significant, with the Fed's policy direction being influenced by these indicators [4] - Recent changes suggest that both inflation and unemployment trends may lead to additional interest rate cuts, with expectations of two more cuts in 2026 [5] - The Fed is currently not expected to cut rates in January, but the next employment report could influence this decision [6] Decision-Making Dynamics - The Fed's decision-making process is complicated by internal divisions, although leadership ultimately drives the final decisions [8] - If the Fed leadership decides that a rate cut is necessary, it could occur in January, despite the current cautious stance [9] - Concerns about cutting rates in a strengthening economy are mitigated by expectations of a soft labor market, with GDP growth projected at an optimistic 2.6% to 2.6% annually [10]