After December's hotter-than-expected CPI print, HSBC's Chief Multi-Asset Strategist Max Kettner joins Yahoo Finance Live to analyze whether the data changes the Federal Reserve's trajectory towards rate cuts this year.

While the inflation reading may not outright "change the calculus of the Fed" itself, Kettner warns other inflation gauges have started "bottoming out and really starting to pick up again" over the last 2-3 months. The reversal he says is "not good news for the Fed" in its bid to fight inflation.

Some investors have started pricing in Fed easing beginning as early as March, but Kettner argues cuts in the near future now look very "unlikely" given re-accelerating indicators.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor's note: This article was written by Angel Smith

Video Transcript

SEANA SMITH: You take a look at the market's reaction and what it means for your portfolios. Right now, we have futures moving lower on the heels of this hotter-than-expected inflation print. Housing driving more than half of the gains that we saw last month. So is it too early? It sounds like it for the Fed to declare victory on inflation.

We want to bring in Max Kettner. He's HSBC Chief Multi-Asset Strategist. It's great to have you here. So first, your reaction to the print that we got this morning and what you think if at all this changes the calculus for the Fed.

MAX-KETTNER: Yeah, good morning. I don't think it changes the calculus for the Fed, let's say, upside down. But at the margin, it is definitely a bit more hawkish, right? So when we look at things like the supercore inflation that you guys were just talking about, let's remember that also all sorts of, you know, different kind of measures of inflation are also starting to pick up.

So you look at, you know, underlying inflation supercore and all that. You look at that on a three-month, three-month basis, or you look at it on an annualized six-month basis. And it's all sort of looking like the last two, three months it's been bottoming out and really starting to pick up again, right?

So that's not good news for the Fed. It doesn't change the calculus for the Fed in the sense of like, oh, there's gonna be no rate cuts at all this year. But definitely pushing a March rate cut through is gonna be incredibly tricky, right?

So March and May to me seem very, very, very unlikely with those kind of fronts because remember, what we've not seen in that report, we see that in other measures. We're seeing, for example, in some of the company surveys that things like output prices are starting to pick up, that compensation plans, wage plans are starting to pick up, right?

So we're starting to see, you know, underlying measures, median CPI measures picking up. We're starting to see, of course, supply chain pressures rising again with the disruptions in the Red Sea, right? We've started to see air freight rates going up at the end of 2023 anyway before all the Red Sea disruptions.

So it's pretty much-- you know, pretty much across the board that it's not like we're seeing a massive second wave of inflation. But I think we're pretty close to actually the low and sort of core inflation. I think people are underestimating that, you know, a sort of 2.6, 2.7 handling core inflation is perhaps the low end. We might be at risk of picking up then again.