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MNI US Macro Weekly: CPI And Waller Test Hawks

CPI and Fed Governor Waller combine to drive a dovish shift ahead of President-elect Trump's inauguration.
USCentral Bank NewsHomepageFederal ReserveMarketsStoryNorth America

Executive Summary

  • Core CPI inflation in December was at the low end of expectations rather than a notable miss, but it still drove a sizeable dovish reaction as it took some wind out of hawkish market pricing.
  • A dovish Fed Governor Waller helped extend the week’s fixed income rally, noting that three or four cuts could be possible this year compared to the median FOMC projection of 50bp of cuts back in December.
  • Retail sales meanwhile signaled continued strong domestic demand to end 2024 whilst jobless claims showed further signs of a healthy labor market.
  • There have also been signs of sharp increases in business sentiment in what could be a sign of pulling forward of demand ahead of potential tariffs.
  • The dovish shift has seen the next Fed 25bp cut considered back around June or July, having been in September prior to CPI and barely priced for 2025 after Friday’s payrolls.
  • President-elect Trump’s inauguration on Monday dominates a thin calendar for the week.

PLEASE FIND THE FULL REPORT HERE: US macro weekly_250117.pdf

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Executive Summary

  • Core CPI inflation in December was at the low end of expectations rather than a notable miss, but it still drove a sizeable dovish reaction as it took some wind out of hawkish market pricing.
  • A dovish Fed Governor Waller helped extend the week’s fixed income rally, noting that three or four cuts could be possible this year compared to the median FOMC projection of 50bp of cuts back in December.
  • Retail sales meanwhile signaled continued strong domestic demand to end 2024 whilst jobless claims showed further signs of a healthy labor market.
  • There have also been signs of sharp increases in business sentiment in what could be a sign of pulling forward of demand ahead of potential tariffs.
  • The dovish shift has seen the next Fed 25bp cut considered back around June or July, having been in September prior to CPI and barely priced for 2025 after Friday’s payrolls.
  • President-elect Trump’s inauguration on Monday dominates a thin calendar for the week.

PLEASE FIND THE FULL REPORT HERE: US macro weekly_250117.pdf

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