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Patient Fed Means Curve Flattening For Now

ADMIN || 16th January 2026

The Fed’s willingness to hit pause on the easing cycle got fresh support Thursday with jobless claims coming in better than expected yesterday. That pushed yields higher and signals bear flattening is likely to extend at least through to the next FOMC decision is announced Jan. 28.

Rate-cut bets were pushed back further after initial and continuing claims came in better than expected. The belly saw a substantial lift in yields while the long end outperformed as 30s advanced 1bp.

The market is moving in line with the way the economy and policymakers assessment of it looks to be evolving. Sticky inflation is driving underperformance at the short end, but signs of potential economic fault lines act to contain yields at the longer end.

While cuts remain on the table for 2026, 49bps are still priced by the end of it, the bar for moving is being raised. That aligns with the commentary from Thursday’s Fed speaker circuit and with tomorrow the last day before policymakers enter the pre-FOMC quiet period the market’s bear-flattening course looks set:

Governor Stephen Miran: Added deregulation to his dovish case. Miran argued a sustained regulatory rollback lifts competition and productivity, acting like a multi-year positive supply shock that leans on prices and supports a more accommodative stance.

Chicago Fed’s Austan Goolsbee: Reiterated that inflation is back at the top of his focus. Labor looks stable: slower hiring, no wave of layoffs and rates can come down further only if inflation improvement is clear and durable.

Atlanta Fed’s Raphael Bostic: Not in a rush (and also on the way out himself). Bostic wants policy to stay restrictive because inflation is still too high and high prices are still weighing on households.

Philadelphia Fed’s Anna Paulson: Comfortable holding steady now after serious of risk management cuts. Open to modest cuts later in 2026 if inflation data validate easing, or if the labor market deteriorates unexpectedly.

Richmond Fed’s Thomas Barkin: Pricing power is fading for the “center of the distribution.” Consumers are stretched, retailers are less confident about passing through costs, and demand is narrower than it looks — driven by the AI ecosystem and wealthy consumers.

Kansas City Fed’s Jeff Schmid: Prefers policy to stay modestly restrictive to keep pressure on inflation. Skeptical more cuts fix labor “cracks” he sees as structural and warned extra easing risks reigniting inflation and credibility.

San Francisco Fed’s Mary Daly: Growth projections look solid, labor is stabilizing, and inflation should improve through the year — with policy “in a good place” to respond as the data evolve.

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