Tech Shares Buckle Ahead of Pivotal CPI, But Dovish Waller Helps to Limit the Damage: Dec. 17, 2025

Sharp declines in tech shares are weighing on the major stock market benchmarks a day before the last CPI of the year. Treasuries were taking losses too, until Fed Governor Christopher Waller stated that labor trends were very soft and that the central bank’s current benchmark is as much as a percent above neutral. The dovish remarks boosted Waller’s odds of becoming the next Chair to 30%, as justifications for deep cuts are what President Trump wants to hear. He did counter those statements favoring looser financial conditions by reiterating the importance of the institution’s independence from the White House though. The yield curve is now relatively flat on the session alongside the greenback, and tomorrow’s moves will largely depend on whether inflation comes in at 2.9%, 3% or 3.1%, as the psychological distinction between a 2- and 3-handle is paramount. Fixed-income watchers will certainly be focused on whether the report signals either more or less monetary policy accommodation in 2026 against the backdrop of Wall Street expecting 2 quarter-point drops but the dots only pointing to 1. Elsewhere in trading, the commodity complex is bullish across the board and silver reached a fresh record.

Difference Between 2.9% and 3% Is Paramount

Tomorrow morning’s Consumer Price Index (CPI) is anticipated to reflect increases of 0.3% month over month (m/m) and 3% year over year(y/y) but my estimates are a tenth of a percentage point lower on both figures. Indeed, my expectation of 0.2% m/m and 2.9% y/y inflation is supported by soft projected readings for shelter, energy and transportation services. Meanwhile, core goods are poised to have risen, although I’m forecasting lighter-than-expected raises for used/new automobiles and apparel which should help generate the downside miss that I’m looking for. A 2.9% reading would likely fuel monetary policy easing excitement, as it would shift the outlook for 2026 cuts from 2 to 2.5, spark animal spirits and drive a year-end rally in stocks and Treasuries. Conversely, however, a result of 3% or higher would hamper dovish sentiments, and move 2 reductions in the next 12 months to just 1 and a half, as the Fed joins other central banks in pause mode in light of persistent cost pressures.