Bank of America makes surprising pivot on interest rates

When the Federal Reserve goes to work, it's got to keep an eye on its dual mandate: maximum employment and price stability. The Fed helps manage the economy by influencing borrowing costs, adjusting overnight interest rates in an effort to maintain those goals of price stability and low joblessness.
On Dec. 18, the central bank announced its third and final interest rate cut of the year, reducing its benchmark Federal Funds Rate by 0.25 percentage points to between 4.25% and 4.5%.
Many factors go into Fed rate decisions. Coming up on Jan. 14, we've got the Producer Price Index of wholesale inflation, and the following day comes the December Consumer Price Index.The CPI is a widely used inflation benchmark, gauging the level of price pressures in the world's biggest economy and the way they influence consumer and investor behavior. The Fed prefers the Personal Consumption Expenditures Index, which adjusts for changes in consumer spending patterns, to help formulate monetary policy. That report is due Jan. 31.
“Inflation reports will dominate this week's economic calendar,” said Bill Adams, chief economist for Comerica Bank. "Driven by high energy prices, the Consumer Price Index probably accelerated on a monthly and annual basis in December, while core CPI likely matched November's pace.”
High energy prices likely pushed up producer prices as well, and the New York Fed will probably report year-ahead household inflation expectations rose last month, he added. A similar reading from the University of Michigan's benchmark consumer sentiment survey, published last week, showed the highest year-ahead levels for inflation expectations since 2008.
Board members speak out
Last week, the Bureau of Labor Statistics said 256,000 new jobs were created in December, well ahead of Wall Street's 164,000 forecast and the downwardly revised 212,000 reading from November.
David Doyle, head of economics at Macquarie, said the employment report “was robust and supportive of our team's view for stabilization in the labor market in 2025.”
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