Whereas last week’s labor market-related data provided uneasiness about conditions, the past week’s January jobs report was better than expected and thereby served to portray conditions to possibly be on firmer footing than feared. It also provided justification for the Fed’s decision to hold policy steady at its late-January meeting, as it essentially revealed the “signs of stabilization” that the Fed had cited in its communique. Some market strategists have retreated on their calls for rate cuts in 2025, although the market still prices for two. We provide further color herein on the report. Other data released during the week was mixed. Retail sales were on the weak side to close 2025, and January Existing Home Sales, hampered by unfavorable weather, fell the most in four years. The Friday morning CPI report, released after this update went to press, may spur a move in rates. The week ahead offers a crowded and steady slew of data in a holiday-shortened week, with multiple housing market reports. Note that some of the data, at least those issued by federal government bodies, are delayed and “off-schedule” reports, due to the most recent shutdown. 

Back by popular demand, Frank Farone, Managing Director of Darling Consulting Group, returns to join us once again for an informative session focused on Liquidity and Asset/Liability Management. Frank will address key challenges and provide actionable strategies to help FHLBNY members stay resilient and take advantage of the new rate environment now and in the months/years to come.

We are now experiencing a “higher for longer” phase in the interest-rate cycle, accompanied by an inversion in the short-to medium terms followed by a steepening (see following chart). The Fed is still in a restrictive posture, but market expectations indicate a near-term easing, however, uncertainty surrounding the potential of future heightened growth leading to elevated inflation is causing steepening at the longer-end of the curve…