IGA Capital Weekly Economic Brief

Joshua Hawley
Feb 18
3 min read

Market Overview: Inflation & Economic Trends

February 18th, 2025

Joshua Hawley

Last week’s inflation data came in hotter than expected, raising concerns about persistent price pressures and their impact on monetary policy. Headline CPI rose 0.5% MoM in January, exceeding the 0.3% forecast and marking the largest monthly increase since June 2022. Core CPI also surprised to the upside, rising 0.4% MoM (vs. 0.3% expected) and pushing YoY core inflation up to 3.3% from 3.2%, contrary to expectations for a decline.

One of the most striking data points was the 0.76% increase in Supercore inflation (core services ex-housing), signaling strong underlying inflationary pressures. Several factors may have contributed to this January price surge, including seasonality, methodology changes, and potential stockpiling ahead of tariff adjustments.

Importantly, inflation gains were broad-based, with shelter costs rising sharply—a critical concern given that shelter accounts for over 35% of headline CPI and more than 75% of core services. Additionally, Core Goods prices, which had been experiencing deflationary trends, posted the largest monthly gain since March 2023. This suggests that any tariff-driven inflationary pressures could first emerge in core goods prices.

Looking ahead, this week’s focus shifts to housing market data (Housing Starts, Building Permits, and New Home Sales) alongside multiple Federal Reserve speeches that could provide insights into the Fed’s rate outlook.

Monday (Feb 17) – President’s Day (Markets Closed); Multiple Fed Speakers
Tuesday (Feb 18) – Empire Manufacturing Index
Wednesday (Feb 19) – Housing Starts; Building Permits; FOMC Minutes Release
Thursday (Feb 20) – Jobless Claims; Philly Fed Index; Multiple Fed Speakers
Friday (Feb 21) – University of Michigan Sentiment; S&P Services PMI; Existing Home Sales

Next Week’s Key Data Releases

Treasury Auctions (2-, 5-, and 7-Year)
Consumer Confidence
GDP Growth Report
Personal Income & Spending
Core PCE (Fed’s Preferred Inflation Measure)
Chicago PMI

Treasury Yields & Fixed Income Outlook

Treasury yields declined last week, reversing earlier losses after January Retail Sales came in weaker than expected. This offset some of the market’s hawkish reaction to the stronger-than-expected CPI data.

2-Year Treasury Yield: 4.26% (-3 bps)
10-Year Treasury Yield: 4.48% (-2 bps)
Yield Curve Spread (2s/10s): Steepened 1 bps to 22 bps

Markets are now looking ahead to next week’s Core PCE release (Feb 27), which is expected to provide a clearer signal on the inflation trajectory. While CPI was stronger than anticipated, PPI (Producer Price Index) came in weaker, suggesting a potential softening of pipeline inflation pressures. The expectation is that Core PCE will continue its gradual downward trend, but another upside surprise could impact rate expectations.

Federal Reserve & Interest Rate Outlook

This week, markets will analyze the FOMC Minutes from the January 30-31 meeting, where the Fed held rates steady at 4.25%-4.50%. These minutes are expected to highlight the Fed’s cautious stance in light of ongoing inflation risks, tariffs, regulatory policies, and trade uncertainties.

For now, the Fed remains in a "wait-and-see" mode, emphasizing a data-dependent approach before making any policy shifts. Given January’s strong CPI print, it is increasingly unlikely that the Fed will cut rates in the near term, unless a significant economic slowdown emerges.

Market pricing reflects 39 bps of rate cuts expected by the end of 2025, up from 25 bps last week, but still far from the multiple cuts that markets had hoped for at the start of the year.

FOMC Meeting – Implied Fed Funds Rate

Implied Overnight Rate = 4.329%
March 19 = 4.324%
May 7 = 4.277%
June 18 = 4.183%
July 30 = 4.133%
September 17 = 4.043%
December 10 (Final 2025 Meeting) = 3.933%

Implications for Businesses & Investors

The higher-for-longer interest rate environment reinforces the need for businesses to strategically manage financing costs. IGA Capital specializes in structured finance solutions, offering clients tailored debt and equity structures to optimize capital access in a dynamic macroeconomic landscape.

Key Areas of Focus:

Corporate & Project Finance – Customized solutions to support business growth
Trade & Export Credit – Access to Export Credit Agencies (ECAs) and structured trade finance
Alternative Capital Strategies – Connecting businesses with private credit, institutional capital, and structured funding solutions