Better bank earnings and inflation readings sent bond and stock prices higher. Earnings and politics will likely have the most significant impact on markets this week.

Inflation picked up in December, if economic forecasters are right—driven by rising food and energy costs. And the uptick will almost certainly push the Federal Reserve to rethink any plans for a rate cut in January.

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

The path of inflation proved bumpier than expected in December, with price growth picking up more than economists had forecast. The consumer price index climbed 2.9% year over year in December, according to data released Wednesday by the Bureau of Labor Statistics.

Consumer inflation data came in slightly hotter than expected in December. Consumer prices were up 2.9% for the 12 months ended in December as compared to 2.7% in November, according to the latest Consumer Price Index data released Wednesday by the Bureau of Labor Statistics. On a monthly basis, prices rose by 0.4%.

The Labor Department releases its producer price index for December on Tuesday. The index measures inflation at the wholesale level, before businesses pass costs on to consumers. Economists predict that wholesale prices rose at a higher pace last month than in November.

Wholesale-level inflation heated up further to close out 2024, a sign that price pressures are building at a time when President-elect Donald Trump threatens to unleash a substantial array of tariffs.

The dollar index was weaker and DHF Capital said persistent inflation could support the currency, with expectations of a hawkish Fed benefiting the dollar, adding that Wednesday’s. inflation data and comments from Fed officials should provide clarity on the 2025 monetary policy outlook.

Fed Chair Jerome Powell has said the central bank will keep its key interest rate elevated until inflation is back to 2%. As a result, Wall Street investors expect the Fed to cut its key rate just a single time this year, from its current level of 4.3%, according to futures prices.

Prices increased by 2.5% on an annual basis in December, down from 2.6% in November. Full coverage from the team at MoneyWeek.

ET – Treasury yields decline and the dollar remains subdued on the first U.S. trading session under President Trump. Yields were already trading lower since inflation data came in relatively mild last week.

The U.S. dollar weakened on President Donald Trump's Inauguration Day, and remained under pressure Tuesday after it became clear immediate tariffs weren't in the cards, according to BofA Global Research.