Entering the home stretch

After showing hesitation in November, the financial markets appear confident the Federal Reserve will close out 2025 with another 25 basis-point cut at its meeting this week. While the outcome seems largely priced in, there is still plenty of chatter to keep things interesting. Recent public comments from Fed officials highlight the ongoing tension between the central bank’s dual mandate, making Chair Powell’s press conference responses crucial. Adding to the intrigue, Powell’s term ends in May, and speculation about his successor likely only intensifies from here.

Last week’s University of Michigan Consumer Sentiment Index showed modest improvement, though remaining on the lower side of recent readings. Within the survey, current conditions were weaker but future expectations improved markedly from the prior month and forward-looking inflation expectations improved slightly. Speaking of inflation, on Friday, the government released the Fed’s preferred measure, the Personal Consumption Expenditures Index, for the month of September. It is old data at this point, but was in-line with expectations at 2.8% year-over-year and consistent with prior levels.

Labor markets are still sending mixed signals. Weekly initial jobless claims beat expectations by declining to the lowest level in years at 191,000. However, third party data providers, ADP and Revelio Labs, reported November employment declines of 32,000 and 9,000, respectively. It is not the first time these sources have been conflicting indicators. It adds to the anticipation for the next unemployment reading, slated for December 16.