The core consumer price index rose 0.2% from November, showing persistent but cooling inflation. Derek Tang, Co-Founder and Economist at Monetary Policy Analytics, discussed this data on "Bloomberg Markets" with Scarlet Fu. He argued that investors expecting a gradual Fed approach might be wrong, suggesting the central bank could act faster than Wall Street currently predicts.

Markets have been pricing in rate reductions starting mid-year, but Tang believes the economic picture supports an earlier move. With inflation cooling and growth holding up, the Fed may have room to ease without spooking markets. This potential March pivot would catch many traders off guard and force a rapid repricing of assets.

The Fed has held rates at a two-decade high since July 2023 to combat soaring inflation. Now, with price pressures receding, officials can focus on preventing an unnecessary downturn. Tang's view suggests the central bank is watching labor data as closely as inflation. A premature cut could stabilize the economy or risk reigniting price growth if not managed carefully.