Does the Fed have a handle on inflation? Tough to say. But inflation is definitely looking like a “two-handle” problem. That’s investor-speak for a rate below 3% but above the Fed’s 2% target. 

When the Fed concludes its meeting today, it’s all but assured to announce another quarter-point cut to interest rates. But moving forward, the worry is that inflation may settle in closer to 3% than 2%. 

I Can Ride my Bike With Two Handlebars

In its September policy meeting, the Fed said its committee forecasted inflation would settle at a comfortable 2.2% through 2025, or low enough to allow a full-point reduction to interest rates over that 12-month span. And through the Fed’s November meeting, when it instituted a quarter-point cut to bring rates down to a range between 4.5% and 4.75%, the projection looked on track. But the past month has delivered enough new data to make such a projection look overly optimistic.

A jobs report from the Labor Department released earlier this month showed the US economy added 227,000 jobs in November, well above expectations, while a shift in consumer sentiment and the holiday season saw an uptick in spending. In other words: The economy is still hot to the touch. Meanwhile, last week saw the release of the latest Consumer Price Index figures from the US Bureau of Labor Statistics, which showed prices increasing 2.7% in November from a year earlier — a signal that inflation remains frustratingly sticky. And, of course, making everything even murkier is the second Trump administration’s promised web of tax cuts and likely-inflationary tariffs.

So where does that leave inflation and interest rates headed into next year? Well, according to some economists, right in the middle of the two-handle:

• In Bloomberg’s monthly survey of economists, published Tuesday, respondents projected the annual core personal consumption expenditures index — a.k.a., the Fed’s preferred inflation gauge that excludes volatile food and energy prices — will advance 2.5% through next year, an increase from the 2.2% prediction in the prior month’s survey. As a result, economists predict three quarter-point cuts next year, not four.
• Wells Fargo senior global market strategist Scott Wren, meanwhile, wrote recently that he recommends investors pricing in just two quarter-point rate cuts next year, and Wells Fargo senior economist Sarah House warns of inflation “getting stuck” in the two-handle zone.

Homecoming: The latest CPI report brought some welcome news: Housing costs, long one of the stickiest sectors of growth, saw inflation ease in November for the first time since 2021. But a full deceleration to pre-pandemic norms is going to take awhile. The Fed’s Cleveland branch, for instance, recently projected some housing inflation still won’t ease to pre-pandemic levels until mid-2026. There’s sticky and there’s super glue.

As one Eras ends, another era dawns…

The Federal Trade Commission announced new rules Tuesday on junk fees — i.e., extra charges that companies hide from you until you’re already on your way to the checkout — specifically for live-event ticket sales and short-term vacation rentals. Don’t get too excited at the idea of cheaper Taylor Swift tickets: The rules just force sellers to present all the extra fees they plan to tack on upfront. 

Is the War Over Now?

The Biden-era war on junk fees arguably began with the Taylor Swift Eras tour. When tickets went on sale back in 2022, outrage quickly followed as Ticketmaster’s website crashed under the strain of Swiftie demand and scalpers made huge profits off the tickets they bought in bulk. The debacle drew lawmaker scrutiny on a number of fronts, and in June 2023, Ticketmaster agreed to offer consumers upfront comprehensive pricing rather than cold-punching them at the checkout window.

Now, just after the Eras tour has finally finished, we see some knock-on effects from the Biden administration’s war on junk fees:

• The new rules will apply to short-term lodging of all kinds, and specifically namecheck Airbnb and VRBO as being subject to them. So next time you see a beautiful log cabin on Airbnb, any suspiciously exorbitant cleaning fee should be right there in the price tag — once the rules take effect in April, anyway.
• This set of rules is likely to be FTC Chair Lina Khan’s swan song, as President-elect Trump has said he plans to replace Khan as chair with Republican Commissioner Andrew Ferguson. Ferguson was the only commissioner to reject the new junk fee regulations, but don’t take that as a sign of how he’ll run the FTC — Ferguson was explicit about the fact he only voted that way because he thinks the Biden Administration shouldn’t be making any rules. “The time for rule-making by the Biden-Harris FTC is over,” Ferguson said.

Plane and Simple: The FTC’s rules won’t apply to the airline industry, one of history’s great junk-fee innovators. A Senate report last month found that US airlines pull in billions from junk fees, and the committee that produced it is currently made up of five Democrats and four Republicans, so a fairly even bipartisan split. The momentum isn’t guaranteed to carry through to next year, however, when control of the chamber shifts to Republicans. Trump didn’t mention junk fees on the campaign trail and his picks for administration leadership roles hint at broad deregulation and abolition of consumer guardrails. Mind you, there are probably no seat-selection fees on Trump Force One.

Sometimes, markets don’t need breathless buzzwords to get excited. Sometimes, “marginally encouraging” will do.

That’s how investment bank Leerink Partners described Pfizer’s announcement Tuesday that its 2025 revenue will be in line with Wall Street forecasts. With the company staring down an activist investor, trying to forge a post-covid revenue future, and a possible incoming Health and Human Services secretary who has expressed vaccine skepticism, meeting expectations was enough to lift its shares by 4.5%.

Activist Schmacktivist

Pfizer reeled in record profits during the pandemic thanks to its covid vaccine, but its share price has since tumbled, sitting at less than half of its December 2021 peak. The five-year chart of the firm’s stock price makes that high point look like part of a distant mountain range.

In October, activist investor Starboard acquired a $1 billion stake and went on the offensive, arguing investments in research and M&A by management had performed poorly, squandering billions in value. A shake-up was needed to return to the top of the mountain, in other words. But recent results, and Tuesday’s guidance, have lanced some of those bubbling concerns, introducing some calm to what was poised to play out as a riches-to-sagging-returns drama:

• Pfizer said Tuesday it will meet its goal to cut $4 billion in costs by the end of this year, with another $500 million in savings to be realized in 2025. It gave revenue guidance of $61 billion to $64 billion for 2024 and 2025, with adjusted earnings per share rising next year, in line with Wall Street’s expectations.
• Pfizer has also posted two consecutive quarters of revenue growth for the first time since the pandemic. The most recent quarterly results, announced in October, saw a 31% year-over-year uptick in sales to $17.7 billion, exceeding analysts estimates.

Good News From Trump 2.0: Pfizer CEO Albert Bourla also delivered good news for essentially the entire pharma sector on Tuesday, when he said he doesn’t expect the incoming Trump administration to significantly alter vaccine policy. Bourla and Eli Lilly CEO David Ricks recently had dinner with Robert F. Kennedy Jr. — whom President-elect Donald Trump plans to nominate to run the Health and Human Services Department and who has publicly expressed vaccine skepticism. Bourla said they “developed a good relationship” while Trump himself expressed his support for at least one vaccine — administered to prevent polio — at a presser on Monday.