Recent economic data brought significant relief, with both the CPI and PPI indicating that inflation was running cooler than expected. In the context of the current administration, this was welcome news, helping to ease concerns about potential monetary policy changes. The Federal Reserve has very frequently signaled they will follow the data and this time it was a positive result towards reducing rates further this year. The change in administration, however, still remains unknown and there is a lot of unrest across lending partners and markets alike. This was also followed by a better than expected Retail Sales report which has shown 2025 to start off with some economic momentum. Both reports are critical factors in shaping future rate adjustments. Despite this, lending partners have been raising rates in the last few months, driven largely by uncertainty tied to the transition of administrative positions.

In the first FOMC Minutes of the year, the Federal Reserve signaled strongly that while officials remain vigilant for inflation exceeding their expectations, they have no plans to raise interest rates. Much of the apprehension among speculators is the monetary policy which could keep inflation higher than expected for some time. Meanwhile, unemployment reports indicate that the previous year remained stable, consistently staying below the annual high–a positive sign of a stronger job market. However, this has been somewhat dampened by the recent reports of the Trade Deficit. Compared to the previous year, the trade gap has nearly doubled, potentially clashing with the policies introduced by the Trump Administration.

With the holiday season coming to a conclusion, there was little in the way of data releases. Last week, the main reports were the Chicago Business Barometer and the ISM Manufacturing Index, both indicating a slight contraction in the manufacturing sector. This comes as we await the upcoming administration change at the White House. The impact of this is relatively minimal, with lending rates continuing their downward trend. Next week we will be expecting the year-over-year for both the Consumer Price Index (CPI) and Producer Price Index (PPI), wrapping up 2024.

With Christmas concluding the prior week, there were few reports other than Consumer Confidence, which had come in slightly below expectations. This should prove to have little impact, especially in the following week. With the New Year on the horizon, there are no reports other than the Chicago Manufacturing output report for the entire week. Happy Holidays!

The rate cut by the Federal Reserve was hotly anticipated, and as predicted, they proceeded with the reduction, signaling the possibility of further cuts depending on inflation data. Although markets were generally receptive to the positive news, other government-related issues had dampened the high spirits temporarily. Outside of the rate decision, the PCE Index (the Federal Reserve’s preferred inflation indicator) has performed positively by beating the forecast. In addition, the Consumer Sentiment was exactly where it should be as expected.