A surprisingly strong payrolls reports and renewed inflation concerns sees only 29bp of Fed cuts priced for 2025
Executive Summary
- Notably stronger than expected December payrolls report, with payrolls growth of 256k, minimal revisions and the unemployment rate falling to 4.09%.
- Unusually sharp climb in long-term consumer inflation expectations in the preliminary January U.Mich report, with the 5-10Y ahead at its highest since 2008.
- ISM Services prices paid jumps most since January for a 22-month high, adding to tariff impact concerns.
- Multiple Fed appearances push the greater caution against cuts narrative, a message included in the FOMC minutes, but with Governor Waller leaning notably dovish (but all pre-payrolls except Goolsbee).
- Rates curves have steepened significantly over the week, with Fed Funds futures showing the next Fed cut only being fully priced for the September meeting and 29bp of cuts for 2025.
- Next week sees US CPI in focus on Wednesday, with PPI unusually landing the day beforehand.
PLEASE FIND THE FULL REPORT HERE: US macro weekly_250110.pdf
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