NDR: Inflation control is critical for 2025 outlook
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NDR: Inflation control is critical for 2025 outlook

Inflation control is critical for 2025 outlook

NDR expects CPI inflation to remain steady in 2025, between 2.75% and 3.25%, with November CPI changes defining the range at 2.7% to 3.3%. However, if the Fed fails to control inflation, investor confidence could weaken, leading to higher inflation and term risk premiums. Key risks include policy uncertainties like tariffs, tax cuts, energy investments, and geopolitical tensions.

Currently, inflation expectations are stable, just below 2.5%, and rising bond yields are tied to budget deficits rather than inflation fears. A sustained rise in inflation swaps above 3.25% could signal de-anchored expectations, destabilizing markets and triggering asset repricing. Major risks include inflation expectations breaking out, Fed complacency on unemployment, and a strong U.S. dollar.

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