There’s uncertainty about expected policy changes favored by the Trump administration - which may be inflationary to a degree. We anticipate that Fed will leave rates unchanged on Jan 29.

The economy has been running hotter than expected lately, raising the possibility that the Federal Reserve will hold interest rates higher for longer, and may not even cut interest rates in 2025 as policymakers had predicted.

Friday’s unexpectedly big increase in December nonfarm payrolls led to a diminished market-based likelihood for any rate cut by the Federal Reserve until September, based on one method of calculating expectations — and one big bank sees the risks tilting toward a rate hike.

The US economy defied expectations in December, adding 256,000 nonfarm payroll jobs, surpassing economists forecast of 164,000 and Novembers revised 212,000 increase. The unemployment rate dipped to 4.

Key Takeaways The odds of the Federal Reserve cutting its benchmark interest rate this year fell after a jobs report Friday showed hiring in December blew past expectations.Strong job growth means less pressure on the Fed to cut interest rates to save the economy and prevent layoffs.