We have revised our Fed call, and now expect rates to remain on hold in December. We now expect two cuts in CY2025. Recent Fed speak has been hawkish, while growth and inflation have clearly exceeded the September SEP estimates. Chair Powell too stressed strong economic data, which is “not sending any signals” for the Fed to be in a hurry to lower rates. We believe that tariffs will be announced relatively soon after Trump is inaugurated – leading realized inflation to pick up by the summer. This base case leaves a narrow window for the Fed to ease at their June meeting. Core CPI was along our expected lines, but relevant details of PPI were surprisingly strong. We expect core PCE rose 0.28% in Oct. In terms of US economic data, it is a relatively light week ahead. Only existing home sales & initial jobless claims are of importance. Claims take on somewhat elevated importance given that they correspond to the survey period for November employment. If our forecast for initial claims is close to the mark (this week 222k), the four-week average would be down roughly 7.4% from the October survey week, pointing to a solid rebound in payroll gains from weather related weakness last month. In US bond auction supply, only 16 BN USD of 20yr USTs & 17 BN USD of 10yr TIPS are there. Fed speak is very light this week with only Goolsbee & Hammack speaking. In rest of the world data, UK headline CPI for Oct is likely to come higher (at 2.1% against Sep's 1.7%) due to increase in household energy bills. In Canada too, the October CPI report is likely to show monthly inflation at 0.3% (vs. -0.4% in September) and annual inflation at 1.9% (vs. 1.6%). In Asia data, Japanese CPI is likely to tick higher while Chinese banks are likely to keep status quo on their prime loan rates this week.
