Observers said the Supreme Court likely will allow Federal Reserve Gov. Lisa Cook to remain at her post while she challenges her purported removal by President Donald Trump. But her continued presence would slow, rather than stop, the president's quest for a voting majority on the central bank board.
Federal Reserve Vice Chair for Supervision Michelle Bowman warned that labor market conditions could weaken further and said the central bank should avoid signaling a pause in monetary policy.
A handful of former Fed officials noted that the markets' measured response to a probe into Fed Chair Jerome Powell was a result of pushback from Trump allies.
Federal Reserve Gov. Stephen Miran said he doesn't "really buy" the view that a potential indictment of Fed Chair Jerome Powell would affect the central bank's monetary policy.
Panelists diverged sharply on the outlook for 2026 at the Executives' Club of Chicago's Annual Economic Outlook panel, held at a hotel in Chicago's Loop.
"The bond market breathed a sigh of relief this morning as the CPI inflation numbers came in a tad weaker than expected," said John Kerschner, global head of securitised products and portfolio manager at Janus Henderson Investors.
Federal Reserve Chair Jerome Powell said the central bank has been served grand jury subpoenas and been threatened with criminal indictment, moves he called "pretexts" to influence interest rates through "political pressure or intimidation."
"With decent job growth in December and a downtick in the federal funds rate, the Federal Reserve will likely hold the federal funds rate steady at [its] next decision in late January," said Comerica Bank Chief Economist Bill Adams.
Federal Reserve Bank of Richmond President Tom Barkin said economic uncertainty should ease in the coming year as businesses gain confidence in sustained demand and adapt to the new policy environment.
Minneapolis Federal Reserve President Neel Kashkari said on CNBC that both sides of the central bank's dual mandate show signs of imbalance, with the labor market appearing more vulnerable.
The Federal Open Market Committee meeting minutes showed the decision was closer than the vote indicated, with "a few" voters suggesting they would have supported no change at the meeting.
Federal Reserve Gov. Christopher Waller said monetary policy must remain insulated from political pressure, arguing that communication with the White House should be limited. Waller is slated to meet with President Trump Wednesday afternoon.
Inflation reports may drive markets in 2026 since the labor market is "sending mixed messages," said Kevin O'Neil, associate portfolio manager and senior research analyst at Brandywine Global.
Kansas City Federal Reserve President Jeffrey Schmid and Chicago Fed President Austan Goolsbee said in statements Friday that their dissents from this week's interest rate decision were spurred by inflation concerns and a lack of sufficient economic data.
Muni yields were little changed, and have barely moved over the past several trading sessions, said Kim Olsan, senior fixed income portfolio manager at NewSquare.
The long-awaited jobs report paints a mixed picture for market participants: nonfarm payrolls increased by a greater-than-expected119,000 in September, but the unemployment rate rose to 4.4%.
Federal Reserve Gov. Christopher Waller said in a speech Monday that private and public-sector data suggests that the labor market is continuing to weaken, making a 25 basis point rate cut in December a prudent choice.
Fed Gov. Stephan Miran has spent his short tenure at the central bank arguing that disinflation in housing and immigration reforms will tamp down inflation in the near term. But other economists say the timing, degree and context of those effects is very much in question.
Federal Reserve Governor Stephen Miran said emerging stresses in housing and private credit markets warrant a reduction to short-term interest rates. While preferring a 50 basis point cut in December, Miran said he would settle for a 25 basis point reduction.
Federal Reserve Vice Chair Philip Jefferson said that as interest rates have moved toward a more neutral level, "it makes sense" now to proceed with caution.
In her first public appearance since President Trump moved to fire her from the Federal Reserve Board of Governors, Fed Gov. Lisa Cook reiterated her commitment to bringing inflation under 2% and said that the labor market remains "solid."
"The knee-jerk reaction of the markets to the Fed meeting (and press conference) was to sell stocks and bonds, because [Fed] Chairman Jerome Powell said that an additional rate cut in December wasn't a sure thing," said Northlight Asset Management Chief Investment Officer Chris Zaccarelli.
The softer-than-expected September consumer price index report, released Friday, reinforced confidence in the likelihood of a Fed rate cut at its October meeting and potentially at its December meeting, said Tom Kozlik, managing director and head of public policy and municipal strategy at HilltopSecurities.
"Investors were not disappointed," said John Kerschner, global head of securitized products and portfolio manager at Janus Henderson (JHG). "Inflation came in softer than expected, leading to a tepid bond market rally" and ensuring a rate cut at the upcoming Federal Open Market Committee meeting.
Federal Reserve Gov. Stephen Miran said Thursday that the central bank's forays into examining climate change and racial justice under the prior administration politicized the Fed. He also argued that Fed officials should limit their comments on economic policies such as tariffs.
Federal Reserve Vice Chair Philip Jefferson said Friday that the economic outlook is uncertain and that he was adopting a cautious approach to gauging whether slowing growth and a softening labor market outweigh inflation pressures from tariffs.
Federal Reserve Vice Chair Philip Jefferson said despite the near term cloudiness to economic projections, he does expect inflation to resume its downward trajectory next year and reach the Fed's 2% inflation target in the coming years.
Seven filings were submitted in response to President Donald Trump's request for the Supreme Court to remove barriers from ousting Federal Reserve Gov. Lisa Cook before litigation proceeds. Most filings argued for the Court to deny the president's application.
Federal Reserve Bank of Kansas City President Jeff Schmid said that the central bank should continue its focus on curbing inflation, as the job market is "largely in balance."
As the "slope of the municipal yield curve remains extremely steep and long bonds are cheap relative to U.S. Treasuries," Daryl Clements, a portfolio manager at AllianceBernstein (AB), predicts "long municipal bonds have a long way to go until they are considered fair value."
The White House said it will appeal a circuit court ruling allowing Federal Reserve Gov. Lisa Cook to remain on the central bank board while her lawsuit challenging her dismissal is litigated.
A panel of DC Circuit Court judges ruled late Monday that the president had not met the stringent statutory requirements to block a lower court injunction, which allowed Federal Reserve Gov. Lisa Cook to remain at her post as her lawsuit challenging her dismissal is litigated.
The White House has appealed a D.C. District Court ruling allowing Federal Reserve Gov. Lisa Cook to remain on the Fed board pending the outcome of her challenge to President Trump's moves to fire her.
The rally stemmed from the weak nonfarm payrolls report and revisions brought down the three-month average to 29,000 jobs per month, further solidifying the chance of a rate cut in September, said Chris Brigati, managing director and CIO at SWBC.
Stephen Miran will take unpaid leave from and might seek to return to President Trump's Council of Economic Advisers, he said, raising conflict of interest questions in his nomination hearing for a seat on the Federal Reserve Board.
Federal Reserve Gov. Christopher Waller criticized his fellow Federal Open Market Committee members for not cutting interest rates in July, but said he is "hopeful" that easing monetary policy soon can keep the labor market from "deteriorating."
President Trump posted a letter on social media addressed to Federal Reserve Gov. Lisa Cook, informing her that he was terminating her due to allegations of mortgage fraud. The move is likely to tee up an unprecedented legal fight over the Fed's independence.
"The combination of stronger core and softer headline readings has left some traders struggling for direction," said Daniela Sabin Hathorn, senior market analyst at Capital.com. "There is a reason to be both bullish and bearish depending on which CPI reading you wish to focus on."
In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.
Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.
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