from CNBC Television
Cracks Emerge in the Fed’s Rate Cut Consensus
by John Carney
Breitbart.com
The End of the Cutting Cycle?
It is not just the bond market that is having doubts about the stance of monetary policy. Federal Reserve officials are also seeing the light.
After lopping off a full percentage point from rates since September, at least some officials at the Fed appear to be questioning whether further easing is warranted. Judging by recent remarks and the latest minutes from their December Federal Open Market Committee (FOMC) meeting, the answer appears to be migrating toward a firm no.
Minutes from the December meeting, released Wednesday, reveal that at least some Fed officials are increasingly worried about inflation risks. “Almost all” officials noted that upside risks to inflation had grown—an acknowledgment that the Fed may have overdone it with rate cuts in an economy still posting respectable growth. Yet despite this newfound caution, the minutes show no appetite for reversing course toward rate hikes. Instead, the message was one of careful watchfulness and, perhaps, quiet regret.
U.S. Maintains Growth Momentum with Warning Signs of Inflation
by James Knightley
ING
Markets have been re-pricing the prospect of Federal Reserve rate cuts this year in the wake of more hawkish Fed commentary. Today’s data suggests that the economy is maintaining its strong momentum and that inflation continues to be sticky with concern over tariff implementation starting to impact corporate thinking and behaviour.
Election clarity is helping to lift activity
We have been suggesting that that the clarity provided by the clean election outcome would lead companies that delayed investment and hiring on election/regulatory uncertainty to start putting money to work. That is seemingly the case based on the latest ISM purchasing managers’ indices. Last week’s manufacturing showed both output and news posting decent gains and today’s services ISM index has also come in stronger than expected with the headline reading rising to 54.1 from 52.1, above the 53.5 consensus.
Gold and Silver Firm On Futures’ Demand
by Alasdair MacLeod
Gold Money
In a shortened trading week, and against a global background of rising bond yields gold and silver have continued to edge higher. This is an important change in investment thinking.
Gold rose by $32 on the week to $2670, while silver rose by 21 cents to $30.12 on futures buying. Gold’s Open Interest rose by about 15,000 contracts while silver’s OI was marginally higher. Gold’s performance is remarkable in that it has been rising while global bond yields have also risen. Clearly, there is a shift in thinking taking place.
We are at an interesting juncture in credit markets, with a growing realisation that dollar interest rates are unlikely to fall much, if at all, and that they might even rise instead by the end of 2025. This logic comes with an appreciation that inflation under Trump’s avowed policies will continue to rise, or more accurately described, the purchasing power of the dollar will continue to decline.
The interest rate cat has been let out of the bag with dire consequences.
Will 2025 Be the Year of U.S. Fiscal Sanity?
With inflation risks persisting and entitlement spending surging, the situation cannot be ignored. But we never should have gotten to this point to begin with.
by Veronique de Rugy
Reason.com
The arrival of a new presidential administration invokes new beginnings and a break from the past. Still, realities from previous administrations remain, such as a fiscal challenge that demands immediate attention. It may weigh on the newcomers even more than they realize today. We can only hope they take it more seriously than their predecessors have done.
The longstanding notion that debt accumulation is benign, based largely on interest rates that for a time fell below growth rates, has proven dangerously misleading. This flawed thinking ignored both human nature and economic reality: Politicians rarely limit borrowing to one-time emergencies (as the theory requires), and interest rates inevitably rise. Today, we face the consequences of these miscalculations.
Fed Favoring Slower Rate Cuts, Predicts Inflation to Run Higher
by Jennifer Schonberger
Yahoo! Finance
The Federal Reserve’s December meeting minutes show officials believe inflation can take longer than anticipated to reach the 2% goal, citing risks from trade and immigration policies.
Yahoo Finance senior Fed reporter Jennifer Schonberger joins Market Domination to discuss the central bank officials’ preference toward keeping interest rates higher for longer or possibly slowing down their pace of rate cuts if elevated inflation persists.
In the video above, Schonberger joins Josh Lipton and Julie Hyman to also uncover then tensions between President-elect Donald Trump and the Fed — namely chair Jerome Powell — over interest rates.
Dem Rep. Lofgren: People Care More About Struggles with Inflation Than Stuff From Four Years Ago
by Ian Hanchett
Breitbart.com
On Monday’s edition of NBC’s “MTP Now,” Rep. Zoe Lofgren (D-CA) stated that “We have prices that are too high for people” and the large spike in prices “has really been very troubling and difficult for a lot of American families. And I think that was top of mind to many voters, not the events of four years ago” of January 6.
Host Gabe Gutierrez asked, “Congresswoman, we’ve seen statement after statement from Democrats urging people to never forget, but is it possible that many Americans just don’t care at this point?”
Lofgren responded, “Well, it’s hard to know. I do think elections are decided on many factors. We have prices that are too high for people. During the pandemic, prices went way up for a variety of reasons, and they didn’t come back down. And that has really been very troubling and difficult for a lot of American families. And I think that was top of mind to many voters, not the events of four years ago.
Federal Reserve Worried About How Trump Policies On Tariffs and Immigration Could Impact Inflation, Minutes Show
Federal Reserve officials discussed concerns about how the policies of President-elect Donald Trump will impact the central bank’s commitment to bring inflation back down to its 2% target — and investors have rapidly adjusted their expectations for interest rates in 2025, fearing higher rates for longer.
by Derek Saul
Forbes
Key Facts
– The minutes from the hawkish Dec. 18 meeting of the Fed’s policy-setting Federal Open Market Committee, which came out Wednesday afternoon, revealed the root of the pause from Fed staff: The looming shift in Washington.
– “The effects of potential changes in trade and immigration policy suggested” restoring 2% inflation “could take longer than previously anticipated,” according to the minutes.
– And “almost all” Fed officials “judged that upside risks to the inflation outlook had increased,” the release stated.
Why Used-Vehicle Prices May Put Upward Pressure On CPI, After Having Been a Powerful Contributor to Cooling Inflation
by Wolf Richter
Wolf Street
The new-vehicle shortages of 2021-2022 now mean lower supply to the used-vehicle market, amid solid demand.
Used-vehicle prices, which had spiked over the two-year span 2020-2021 by 65% on the wholesale side and by 55% on the retail side, provided rocket fuel to inflation. Then, as prices careened down in 2022 through 2023, giving up about half of the wholesale price spike and about a third of the retail price spike, they contributed to the sharp deflation in durable goods that helped decelerate overall inflation. But this drop in used-vehicle prices petered out in 2024, amid solid demand facing tight inventories due to reduced supply from rental fleets and lease terminations.
CNBC Daily Open: Markets Shrug Off Inflation Warnings
by Yeo Boon Ping
CNBC.com
What you need to know today
Fed cautious about inflation and Trump’s policies
At their December meeting, U.S. Federal Reserve officials expressed concern that inflation would stubbornly remain above the central bank’s 2% target, and over the possible impact of U.S. President-elect Donald Trump’s policies. Consequently, officials would be moving more slowly on interest rate cuts, minutes released Wednesday showed.
Stocks shrugged off inflation concerns
U.S. stocks eked out a small gain on Wednesday even though the 10-year Treasury yield
touched to its highest since April following the release of the Fed’s minutes. The pan-European Stoxx 600 index lost 0.19%, relinquishing earlier gains after flash data by the European Commission showed that EU economic sentiment indicator had dropped 1.7 points in December.
Wall Street Ends Lower as Inflation Fears Mount
by Johann M Cherian, Sukriti Gupta and Carolina Mandl
Yahoo! Finance
Stocks gave up early gains after a Labor Department report showed job openings unexpectedly increased in November, while a separate report said services sector activity accelerated in December with a measure tracking input prices surging to a near two-year high.
“Markets are starting to recognize that they thought we were in the eighth inning of the inflation fight but now it’s going to be higher for longer,” said Joe Mazzola, head of trading and derivatives strategist at Charles Schwab.