The Fed has a very strong case to keep rates higher for longer

• Markets expect multiple rate cuts from the Fed in 2024, but there’s still a case for them to remain high.

• The economy is growing above trend, unemployment is low, and fresh inflation data came in hotter than expected.

• Fed officials have said recently that inflation is still on the right trajectory.

At the end of last year, stocks were soaring, the labor market remained robust, consumers were still spending, and the “immaculate disinflation” narrative appeared fully intact. Rate cuts from the Federal Reserve seemed imminent, with some on Wall Street forecasting as many as six cuts beginning in March.

Yet Jerome Powell and his central bank colleagues have rebuffed those forecasts, and markets have pushed their rate cut predictions further into 2024.

This week’s economic data tempered optimism once more.

On Tuesday, January inflation clocked in at 3.1% year-over-year, above the expected 2.9%, according to the Bureau of Labor Statistics. Compared to the prior month, CPI climbed 0.3%, more than the forecasted 0.2%.

And the producer price index for January came in at 0.3% on Friday, higher than the expected 0.1% increase.

That data comes as stocks continue to notch all-time highs and cryptocurrencies are soaring like it’s 2021.

Nonfarm payrolls also surged in January, and unemployment is hovering near historic lows. US economic growth, too, continues to crush expectations, and Atlanta Fed researchers don’t anticipate a slowdown in GDP.

Meanwhile, the housing market has yet to soften. The price for a typical home in the US has climbed 47% since 2019, according to the S&P CoreLogic Case-Shiller National Home Price Index.

“The economy is healthy, price stability is within sight, but there is more work to do,” San Francisco Fed President Mary Daly said in a speech Friday. “To finish the job will take fortitude. We will need to resist the temptation to act quickly when patience is needed and be…