Inflation Holding Steady
Inflation is expected to hover
around the 3% mark through year-end, barring any major shocks. Core CPI
(excluding food and energy) is also near 3%, signaling consistent price
pressures in housing and services. With inflation still above the 2% target and
the labor market softening, the policymakers face a delicate balancing act in
its Dec 9-10 meeting. Markets are now fully pricing in a December rate cut of
25 bps, but some uncertainty remains due to missing October CPI data. Despite
this gap, the Fed has made not signaled any deviation from market expectations.
Meanwhile, with the next Fed Chair appointment approaching near Christmas,
Trump announced last night he has made his pick and expects his nominee to cut
interest rates.
Geopolitics
Broadening the lens, US officials
met with Ukrainian negotiators over the weekend and are now heading to Moscow
to push a revised peace plan. Though there are major sticking points, such as
territorial concessions and security guarantees, Putin called it a possible
basis for a future deal. As for the Middle East, reports of US-Iran tensions
remain stiff. Analysts warn that any escalation could disrupt oil markets,
drive inflation higher, and complicate the Federal Reserve's policy path. Both
situations may trigger a short-term flight to safety, nudging yields and, by
extension, mortgage rates, slightly lower.
Labor Market Softens
The US job market continues to
show signs of cooling. The latest official data (September) reported modest
levels of job creation, but employment ticked up to 4.4%, its highest level in
four years. Gains are concentrated in healthcare and food services, while
sectors like transportation, warehousing, and manufacturing are shedding jobs.
Private payroll data suggests layoffs are accelerating, particularly in tech
and retail, as companies adopt AI-driven efficiencies. Wage growth, still
around 4.5% year-over-year, underscores lingering cost pressures. Looking
ahead, economists expect job growth to slow further, accompanied by a slight
uptick in the unemployment rate. This softening labor trend poses yet another
reason for a December rate cut, even as inflation remains above target.
Key Economic Data Releases
- Monday, Dec 1: PMI, Construction Spending
- Tuesday, Dec 2: Fed Speeches from Powell & Bowman
- Fed is in blackout mode for policy specifics, but tone
matters
- Wednesday, Dec 3: ADP Employment
- Thursday, Dec 4: Initial Jobless Claims (week ended Nov
29)
- Friday, Dec 5: September PCE, September Personal Income
& Spending
WEEKLY INTEREST RATE SNAPSHOT (Images)
*National average rates are
provided by Bankrate.com and Bloomberg Professional as of 12/1/2025 and are not
advertised rates from Rate, Inc.
