Weekly economic commentary: A matter of conditioning and a matter of fact

Summary

United States: A matter of conditioning and a matter of fact

• This week brought with it a hot print on service-sector prices and a solid job gain for December. When combined with looming tariff-related uncertainly, these developments add more fodder to the case that the Fed will pause interest rate cuts at its upcoming meeting.

• Next week: CPI (Wed.), Retail Sales (Thurs.), Housing Starts (Fri.)

International: In with the new: Updated economic data from economies around the globe

• A new year has begun, and with it has come a wave of economic data from countries around the world. Eurozone inflation picked up mildly, while Swiss price pressures eased. Developments in Canada made headlines this week, with Prime Minster Justin Trudeau stepping down as leader of the Liberal Party. In Latin America, inflation data from Mexico and Brazil were somewhat mixed.

• Next week: U.K. CPI (Wed.), Australian Employment (Thu.), China GDP (Fri.)

Interest rate watch: Cutting rates, but higher yields

• When U.S. markets closed on Sept. 17, the 10-year Treasury yield was 3.65%. The next day, the FOMC announced that it was reducing the federal funds rate by 50 bps, the first rate cut by the central bank since 2020. Since then, the FOMC has cut the fed funds rate by an additional 50 bps, but the 10-year Treasury yield is roughly 100 bps higher at 4.65%. What happened?

Credit market insights: Gaps persist in household net worth across wealth spectrum

• The Federal Reserve recently released the Q3-2024 Distributional Financial Accounts, providing a more in-depth look at how aggregate gains in household net worth were distributed across the income and wealth spectrum.

Topic of the week: Immigration drove population growth in 2024

• The U.S. population expanded by 1.0% in 2024, marking the fastest pace of population growth in more than two decades. As demographics remained unfavorable, immigration drove most of the increase. Domestic movements within the United States also quieted; however, Americans continued to leave expensive coastal areas for more affordable locations across the Sunbelt and Mountain West.

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