Fed’s Williams sees cooling jobs market, tariff risks contained

    New York Fed President John Williams said monetary policy is “well positioned” heading into 2026, as the Fed has moved from a modestly restrictive stance toward neutral. He emphasized the need to return inflation to the 2% target without creating “undue risks” to the labor market, framing current policy as appropriately balanced after recent cuts.

    Williams noted a shift in the risk profile. “the downside risks to employment have increased as the labor market has cooled, while the upside risks to inflation have lessened somewhat,” he noted.

    On tariffs, Williams said their impact on prices has been smaller than initially expected. Import levies appear to have caused one-off price increases rather than persistent inflation pressures. He expects tariff-related effects to be fully realized in 2026, with inflation moderating to around 2.5% next year before easing back to 2% in 2027.

    Turning to the labor outlook, Williams sees the unemployment rate ticking up to 4.5% this year, but expects it to gradually decline over the following years alongside forecast growth of 2.25% in 2026. He stressed that the cooling in the labor market has been gradual, “without signs of a sharp rise in layoffs or other indications of rapid deterioration”.

    Fed’s Miran presses case for faster easing, shelter disinflation will offset sticky goods prices

      Fed Governor Stephen Miran, who dissented at the last FOMC meeting in favor of a larger 50bps cut, reinforced his dovish stance in a speech today, arguing that inflation risks are being overstated.

      Miran acknowledged that the lack of a clear downward trend in core goods prices could argue for keeping rates elevated, but said he expects disinflation in housing services to “counterbalance that possibility”. The key risk, in his view, would be a renewed pickup in shelter inflation or a sustained overshoot in core goods prices. He judged both outcomes as unlikely, adding that if shelter inflation slows as expected while tariff effects disappoint, inflation could “undershoot our inflation target”.

      He also pushed back against reliance on backward-looking inflation measures. Shelter inflation, Miran argued, reflects supply-demand imbalances from “two to four years ago” rather than current conditions. Given long and variable policy lags, he said monetary policy should be calibrated for 2027, not anchored to inflation dynamics from 2022.

      On the employment side of the mandate, Miran warned that labor market deterioration can occur quickly and nonlinearly, and can be difficult to reverse. Keeping policy unnecessarily restrictive risks avoidable job losses, particularly when prices have stabilized, even if at higher levels. He reiterated that a quicker pace of easing would better move policy toward a neutral stance and reflect the current balance of risks.

      Full speech of Fed’s Miran here.

      Canada CPI unchanged at 2.2% in November, services inflation cools

        Canada’s inflation data came in softer than expected in November. Headline CPI was unchanged at 2.2% yoy, undershooting expectations for an uptick to 2.4% and suggesting inflation remains comfortably contained near target.

        The moderation was led by services inflation, which slowed to 2.8% yoy from 3.2% in October. That deceleration more than offset firmer goods prices, where grocery inflation accelerated sharply to 4.7% from 3.4%, the strongest pace since December 2023.

        Gasoline prices also fell at a slower annual pace, declining -7.8% yoy compared with a -9.4% drop previously. Stripping out gasoline, CPI rose 2.6% year over year for a third consecutive month, pointing to stability rather than renewed inflation momentum.

        Core measures reinforced that message. CPI Median slowed to 2.8% from 3.0%, while CPI Trim eased to 2.8% from 2.9%, both coming in below expectations. CPI Common edged up slightly to 2.8%, matching forecasts.

        Full Canada’s CPI release here.

        Eurozone industrial production rises 0.8% mom in October, beats expectations on broad-based gains

          Eurozone industrial production delivered a modest upside surprise in October, rising 0.8% mom and beating expectations for a 0.7% increase.

          The gains in the Eurozone were broad-based across sectors. Output of energy rose 1.1% mom, capital goods increased 0.5%, and intermediate goods edged up 0.3%. Consumer-related categories were firmer, with durable consumer goods jumping 2.0% and non-durable goods rising 1.2%, suggesting some resilience in downstream demand.

          Across the wider EU, industrial production increased 0.3% mom, masking sharp country-level divergences. Ireland (4.0%), Luxembourg (3.6%), and Croatia (3.1%)posted the strongest gains, while Sweden (-6.5%), Belgium (-3.4%), and Denmark (-3.2%) recorded steep declines.

          Full Eurozone industrial production release here.

          SECO upgrades 2026 GDP forecast, downgrades inflation

            Swiss economic prospects have improved modestly, with the Federal Government Expert Group on Business Cycles revising up its 2026 growth forecast. GDP adjusted for sporting events is now seen expanding 1.1%, up from 0.9% projected in October, bringing the outlook broadly back in line with June forecasts when US tariffs stood at 10%. The reduction in US tariffs has improved conditions for exposed sectors and eased pressure on foreign trade.

            Foreign demand is expected to provide a positive, though still “moderate”, contribution next year. Domestic demand, however, remains the “main driver of growth”, supported by resilient consumption and a gradual pickup in investment as capacity utilization improves. SECO expects investment activity to strengthen slightly as firms respond to firmer underlying demand.

            Low inflation remains a key support. Consumer prices are forecast to rise just 0.2% in both 2025 and 2026 (down from 0.5%0, helping preserve real incomes and underpin solid private consumption.

            Looking further ahead, growth is expected to normalize at 1.7% in 2027 as global conditions improve, though the outlook assumes tariffs remain at current levels and uncertainty around trade policy remains elevated.

            Will Swiss SECO economic forecasts here.

            China data disappoints as consumption and investment weaken further

              China’s November activity data delivered a broadly weaker-than-expected picture. Industrial production rose 4.8% yoy, missing expectations for 5.0% growth and marking the weakest pace since August 2024.

              The sharper disappointment came from consumption. Retail sales rose just 1.3% yoy, far below expectations of 2.9% and slowing markedly from October’s 2.9% pace. It was also the weakest reading since December 2022.

              Investment conditions also deteriorated. Year-to-date fixed asset investment fell -2.6%, deeper than expected -2.3% and the sharpest contraction since the pandemic in 2020. The drag from property intensified, with real estate investment down -15.9% in the first eleven months of the year, extending the slump seen earlier and reinforcing the view that the property sector remains a central constraint on China’s recovery.

              Japan Tankan: Manufacturing sentiment improves as firms absorb tariff impact

                Japan’s Q4 Tankan survey delivered a broadly supportive signal for the economy, reinforcing expectations that the BoJ will proceed with rate normalization. The large manufacturing index rose from 14 to 15, in line with expectations, marking a third consecutive quarterly improvement and the strongest reading since December 2021. The result suggests manufacturers have so far weathered the impact from higher U.S. tariffs better than feared.

                Sentiment among non-manufacturers was less impressive, with the index unchanged at 34, falling short of expectations for a modest uptick. Even so, the divergence does not point to a meaningful deterioration in overall conditions, as services confidence remains elevated relative to historical norms.

                Capital spending intentions added to the constructive tone. Large firms now plan to increase investment by 12.6% in the current fiscal year ending March 2026, slightly above market expectations of 12.0%.

                The survey also indicated firms expect inflation to average 2.4% across one-, three-, and five-year horizons, suggesting expectations are stabilizing around the BoJ’s 2% target.

                With tariff uncertainty easing and manufacturing sentiment holding firm, the survey supports the dominant market view that BoJ is positioned to raise rates in December, even as the pace of tightening beyond that remains gradual.

                Full BoJ Tankan release here.

                RBNZ’s Breman sees OCR holding at 2.25% if outlook unfolds as expected

                  RBNZ Governor Anna Breman signaled in media interviews today that the bar for further near-term easing remains high. While the forward path published in the November Monetary Policy Statement allows for a small probability of another rate cut, Breman stressed “if economic conditions evolve as expected the OCR is likely to remain at its current level of 2.25 per cent for some time.”

                  Looking ahead to the next OCR decision in February, Breman said the central bank will continue to assess incoming data, financial conditions, and global developments, with a particular focus on implications for New Zealand’s economic outlook and its medium-term inflation objective.

                  Breman also reiterated that monetary policy is not on a preset course, highlighting the MPC’s regular meeting schedule as a reflection of that flexibility.

                  RBNZ statement on Breman’s interviews here.

                  NZ BNZ service falls to 46.9, recovery hopes dented

                    New Zealand’s services sector slipped deeper into contraction in November, reinforcing signs that domestic demand remains fragile. BusinessNZ Performance of Services Index fell from 48.4 to 46.9, marking the lowest level of activity since May and sitting well below the survey’s long-run average of 52.8. All five sub-indices remained in contraction territory, underlining the broad-based nature of the slowdown.

                    Activity and sales saw the sharpest deterioration, dropping from 48.4 to 45.8, while employment also weakened from 48.6 to 46.4. New orders edged marginally higher from 49.2 to 49.3, offering little evidence of an imminent turnaround in demand.

                    BusinessNZ Chief Executive Katherine Rich said the November reading “put to bed” any immediate hope that the sector was moving toward expansion. While the proportion of negative comments eased slightly from recent months, businesses continued to cite a weak economic backdrop, low consumer confidence, high living costs, inflation, interest rates, and reduced spending as the dominant constraints on activity.

                    Full NZ BNZ PSI release here.

                    Fed’s Schmid: Policy not overly restrictive before rate cut

                      Kansas City Fed President Jeffrey Schmid explained his dissent at this week’s FOMC meeting, where he voted to keep rates unchanged. He said in a statement his assessment of the economy has not shifted meaningfully since October, citing “continued momentum” in activity and inflation that remains above comfort levels.

                      Schmid described inflation as “too high” and the labor market as cooling but still “largely in balance.” In that context, his preference is to maintain monetary policy in a “modestly restrictive” setting rather than ease prematurely.

                      Addressing debate around policy restrictiveness, Schmid downplayed reliance on theoretical estimates of the neutral rate, calling r* an academic concept without a real-world equivalent. Instead, he said policy should be judged by “how the economy actually evolves”. From both incoming data and business contacts, he sees an economy that is “showing momentum and inflation that is too hot”, suggesting that policy is “not overly restrictive”.

                      Full statement of Fed’s Schmid here.

                      Fed’s Goolsbee: Waiting for more data the “wiser choice”

                        Chicago Fed President Austan Goolsbee explained his dissent at this week’s FOMC meeting, where he voted to hold rates rather than support the 25bps cut. He said policymakers should have waited for more incoming data, particularly on inflation, arguing that delaying the decision into the new year “would not have entailed much additional risk” and would have allowed the Fed to assess a more complete set of economic readings.

                        In a statement, Goolsbee noted that feedback from businesses and consumers in his district consistently points to prices as “a main concern”. At the same time, he described the broader economy as showing stable growth, with a labor market that is “only moderately cooling”. He characterized the current environment as one of “low hiring, low firing,” suggesting firms are responding to uncertainty rather than a traditional cyclical slowdown.

                        While acknowledging that recent inflation pressures may be linked largely to tariffs and could ultimately prove “transitory”, Goolsbee cautioned against assuming that outcome too quickly. He reiterated optimism that interest rates can fall meaningfully over the coming year, but stressed discomfort with heavily front-loading cuts.

                        Full statement of Fed’s Goolsbee here.

                        UK GDP contracts -0.1% mom in October as services drag deepens

                          UK GDP contracted by -0.1% mom in October, undershooting expectations for a 0.1% gain and marking a third consecutive month of stagnation or contraction. The economy had already shrunk by -0.1% in September after flat growth in August, reinforcing concerns that momentum is fading as the year draws to a close.

                          The monthly breakdown was weak across key domestic sectors. Services output fell -0.3% mom and construction declined -0.6%, offsetting a 1.1% rise in production. The continued softness in services is particularly concerning given its dominant share of UK economic activity.

                          On a three-month basis, GDP fell -0.1% in the period to October compared with the previous three months. Services recorded no growth, extending the recent trend of slowing activity, while production output dropped -0.5% due largely to weaker motor vehicle manufacturing. Construction also declined by -0.3%.

                          Full UK GDP release here.

                          DOW eyes 50k as Fed easing fuels broad-based equity breakout, except tech

                            DOW decisively to a new record high yesterday, reinforcing the view that the Santa rally is firmly in force after clearly this week’s FOMC risk. With momentum accelerating, the index is now on track to challenge the 50,000 psychological level before year-end, a milestone that reflects renewed confidence in the outlook for growth and monetary policy.

                            Markets have looked past persistent debate over AI valuations, focusing instead on the Fed’s less-hawkish-than-expected rate cut earlier this week. The shift has favored cyclical and traditional sectors. Russell 2000’s surge to a record close adds further confirmation. Smaller companies are typically more sensitive to changes in borrowing costs, and their leadership highlights expectations that easing financial conditions will filter through to the real economy.

                            Technically, near-term outlook for DOW remains bullish as long as 47,462.94 support holds. The current uptrend is targeting 78.6% projection of 28,660.94 to 45,071.29 from 36,611.78 at 49,510.32, with scope to stretch above 50,000 handle. Attention now turns to whether S&P 500 joins the breakout to confirm momentum, even as NASDAQ’s participation remains less certain.

                            New Zealand BNZ manufacturing improves to 51.1, but momentum still modest

                              New Zealand’s BNZ Performance of Manufacturing Index edged up from 51.2 to 51.4 in November, remaining in expansionary territory but still below the long-run average of 52.4.

                              Production strengthened from 52.0 to 52.8, while employment rebounded sharply from contractionary 48.3 to 52.4, suggesting manufacturers are becoming more confident about staffing needs. That said, new orders softened notably, slipping from 54.5 to 51.9, highlighting lingering caution about the sustainability of demand beyond the seasonal boost.

                              Survey commentary was more encouraging. The share of negative comments fell to 45.6% from 54.1% in October and 60.2% in September. Respondents cited stronger Christmas-related demand, improving economic conditions, rising customer confidence, and a pickup in both domestic and overseas orders, alongside firmer construction activity and new product launches.

                              Full NZ BNZ PMI release here.

                              US initial jobless claims jump back to 236k

                                US initial jobless claims rose 44k to 236k in the week ending December 6, above expectation of 205k. Four-week moving average of initial claims rose 2k to 217k.

                                Continuing claims fell -99k to 1838k in the week ending November 29. Four-week moving average of continuing claims fell -17k to 1918k.

                                Full US jobless claims release here.

                                SNB holds at 0.00%, medium term inflation outlook virtually unchanged.

                                  SNB left its policy rate unchanged at 0.00%, as widely expected, and reiterated its readiness to intervene in foreign exchange markets if necessary. The hold reflects the bank’s assessment that current conditions do not justify a shift, even as inflation undershot expectations.

                                  In its statement, the SNB noted that inflation has been slightly weaker than anticipated in recent months, but emphasized that medium-term pressures are “virtually unchanged” compared with September. The conditional inflation forecast is marginally lower in the near term but shows little change beyond that. The Bank now sees inflation averaging 0.2% in 2025, 0.3% in 2026 and 0.6% in 2027, based on the assumption of a 0% policy rate throughout the forecast horizon.

                                  The economic outlook for Switzerland has “improved slightly”, helped by reduced U.S. tariffs and a modestly better global backdrop. SNB now expects GDP to grow just under 1.5% in 2025 and around 1% in 2026, though it cautioned that unemployment is likely to edge higher.

                                  Full SNB statement here.

                                  AUD/NZD to extend correction through 1.14 after data blow to RBA hike hopes

                                    Australian Dollar weakened broadly after today’s significantly softer labor-market report, though it continues to show relative resilience against the U.S. Dollar and most majors—with the notable exception of Kiwi. The sharp downside surprise in employment has tilted sentiment in favor of further downside in AUD/NZD as markets reassess the likelihood of near-term RBA tightening.

                                    Speculation of a 2026 RBA rate hike had intensified in recently, particularly after Governor Michele Bullock signaled that cuts were not on the horizon and that the Board had actively discussed scenarios in which rates might need to rise.

                                    However, today’s -21.3k contraction in employment has sharply undercut that momentum. The data suggest that any discussion of a rate hike in the near term is premature. A long pause now appears the more plausible baseline—at least through Q1—while the RBA waits for a fuller run of data to determine whether underlying developments justify movement in either direction.

                                    Technically, AUD/NZD is extending the corrective pattern from 1.1634. Today’s dip suggests the recovery from, as the second leg of the correction form 1.1634, might have completed at 1.1514 already. Deeper fall would be seen to 1.1396 first.

                                    Break there will extend the fall to 61.8% projection of 1.1634 to 1.1396 from 1.1514 at 1.1367, and possibly further to 100% projection at 1.1267. But even in this case, downside should be contained by 1.1275 cluster support, which is slightly below 38.2% retracement of 1.0649 to 1.1634 at 1.1258.

                                    The up trend from 1.0649 is expected to resume through 1.1634 at a later stage. But that will require renewed conviction that the RBA is genuinely preparing for a rate hike in 2026.


                                    Australia jobs shock as employment drops -21.3k in November

                                      Australia’s November labor data delivered a downside surprise, with employment falling by -21.3k against expectations for a 20k increase. The weakness was driven by a sharp -56.5k drop in full-time positions, partly offset by a 35.2k rise in part-time roles.

                                      Despite the weaker headline, unemployment rate held at 4.3%, better than the expected uptick to 4.4%. The jobless rate has now been steady at 4.3% in five of the past six months, reflecting a labor market that is loosening but not deteriorating sharply. Participation rate dipped -0.2pts to 66.7%, suggesting some softening in labor-force engagement.

                                      Monthly hours worked were unchanged on the month but still up 1.2% yoy, indicating modest resilience in total labor input despite weaker job creation.

                                      Full Australia employment release here.

                                      FOMC cuts as expected; dot plot shows only one cut per year through 2027

                                        The Fed cut interest rates by 25bps to 3.50–3.75%, fully in line with expectations. The decision was done by a three way split. Governor Stephen Miran again voting for a larger 50bps reduction. Meanwhile Chicago Fed Austan Goolsbee and Kansas City Fed Jeffrey Schmid voted for no change. All other policymakers supported the quarter-point move.

                                        The new projections signaled remarkable continuity. The federal funds rate path was left unchanged, with policymakers still expecting the policy rate to fall to 3.4% by the end of 2026, then 3.10% by the end of 2027, and remain there through 2028. This implies one 25bps cut per year in both 2026 and 2027.

                                        Growth expectations, however, were revised meaningfully higher. GDP is now projected to expand 2.3% in 2026, up from 1.8% previously, and to grow 2.0% in 2027 and 1.9% in 2028. Labor-market projections were largely steady, with unemployment expected to be 4.4% in 2026, unchanged from prior forecasts. The rate for 2027 was nudged down from 4.3% to 4.2%, with 2028 left at 4.2%. Policymakers continue to signal a soft-landing baseline, where job markets cool without a material rise in unemployment.

                                        Inflation projections were modestly lowered. Headline PCE is now expected at 2.4% in 2026, down from 2.6%, while the forecasts for 2027 and 2028 remain at 2.1% and 2.0%. Core PCE was trimmed to 2.5% for 2026 and left unchanged thereafter.

                                        Full Fed statement and SEP.

                                        BoC holds steady, points to weak Q4 GDP and balanced inflation outlook

                                          The BoC kept the overnight rate unchanged at 2.25% today, in line with expectations. The most notable element of the statement was the Governing Council’s assessment that, if inflation and economic activity evolve broadly as projected in October, the current policy rate is “about the right level.” This marks a clear signal that the easing cycle has effectively ended and that the bank has entered a long period of steady policy barring major surprises.

                                          The statement acknowledged mixed growth dynamics heading into year-end. The Bank expects final domestic demand to expand in Q4, but weakness in net exports will leave overall GDP “likely weak.” Growth is projected to firm in 2026, though policymakers warned that uncertainty remains elevated and that swings in trade flows could continue to create quarter-to-quarter volatility.

                                          Employment has posted solid gains over the past three months and the unemployment rate declined to 6.5% in November. However, job markets in trade-sensitive sectors “remain weak,” and economy-wide hiring intentions are still “subdued”—reflecting the broader drag from structural trade reconfiguration.

                                          Despite these pressures, BoC expects the ongoing economic slack to counterbalance cost increases associated with shifting trade patterns. As a result, CPI inflation is still anticipated to stay close to the 2% target, providing the BoC with scope to maintain a steady hand for the foreseeable future.

                                          Full BoC statement here.