January 2025 Fed & Rates Call Update
- Jan 10, 2025
Pushing Back/Reducing Cuts (post strong NFP)...
- A key driver of our US macro view has been the diverging and mixed messaging that we have observed from the US labor statistics. However, the recent December 2024 jobs report was one of the more broad-based and strong reports in quite some time.
- The December NFP headline monthly job reading from the establishment survey was a decent beat at 256k (versus 165k BB median consensus). Household data showed a major bounce back of 478k and the unemployment rate actually declined to 4.1%.
- Fed Rate Path Implications: We now expect a longer Fed pause and we have pushed back our next cut to June 2025 and reduced the total amount of cuts to 2 in 2025. We also expect QT to continue on longer, with updates on the process taking place in early summer.
- US Rates Forecasts: We now expect the Fed to end the easing cycle around 3.75-4% and have raised our overall rate path by 25bps across the curve. We also expect long-term rates to make new highs but peak earlier in Q2 post the first 100 days of Trump 2.0.
|
Tenor |
Q1-2025 |
Q2-2025 |
Q3-2025 |
Q4-2025 |
|
Fed Funds Rate |
4.3750 |
4.1250 |
3.8750 |
3.8750 |
|
US 2-Year |
4.3750 |
4.1250 |
4.2500 |
4.0000 |
|
US 5-Year |
4.6250 |
4.5000 |
4.3750 |
4.2500 |
|
US 10-Year |
4.7500 |
4.7500 |
4.6250 |
4.6250 |
|
US 30-Year |
5.0000 |
5.0000 |
4.8750 |
4.8750 |