The Big Idea
Weekly Economic Calendar plus Forecast Table
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A stronger-than-expected December employment report further convinced financial market participants (and several Street economists) that the FOMC is not going to cut by much this year. Fed funds futures are now pricing about 30 basis points of Fed rate reductions for all of 2025, down by about 15 basis points on Friday. I continue to believe that the economy is likely to soften somewhat in the first half of this year, as businesses sit on the sidelines and delay investment and hiring plans until they have better clarity on how the incoming Administration will alter tax, regulatory, and tariff policies. As a result, for now, I am sticking to my call that the FOMC will cut rates again in March (after a January pause) and will reduce rates by a total of 75 basis points this year.
This week offers two high profile economic releases that will help to shape the monetary policy outlook. I look for firm December CPI results. Headline inflation may have increased by 0.4% while the core component could have risen by 0.3%. In contrast, I have below-consensus estimates for December retail sales, and I expect tepid gains for the core measures. Nonetheless, I am more interested in seeing how the economy performs in early 2025 than in the December data and am unlikely to shift my Fed view regardless of how the December economic data play out.
Economic Calendar – January 13, 2025
Forecast Table – January 10, 2025
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