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.
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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