by Kim | Jan 26, 2026
The key events for the w/c 26 January 2026: FOMC & BoC Meetings, Aus Q4 CPI, Euro area GDP Q4
As the FOMC prepares to meet this week, U.S. data continued to reflect resilient activity through the latter half of 2025. Paradoxically, this activity has not yet fuelled a hiring rebound, even as unemployment remains low. Meanwhile, the catch-up release of the Fed’s preferred PCE inflation measures suggests a growing trend of underlying disinflation, providing a more constructive, if cautious, backdrop for policymakers.
The US PCE Catch Up: The “Tail” Effect
On the surface of the Oct and Nov PCE reports, progress on disinflation appears to have stalled. Both headline and core PCE inflation edged up to +2.8% in Nov (from +2.7% in Oct). While core PCE has slowed somewhat from its 3% rate a year ago, headline inflation is still running slightly ahead of last year’s levels.
However, developments in the trimmed mean and median inflation measures suggest that the underlying inflation conditions have cooled. While the larger improvement in both of these measures in the last two months could be related to the restart of the data collection, there is still a broader trend in place.
- Trimmed Mean PCE: This rate slowed to +2.5% over the year in both Oct and Nov (from +2.7% in Sept), falling notably below the core PCE inflation rate. This suggests that outlier results are likely keeping core PCE inflation “sticky”. The weighted average inflation rate of the ‘top tail’ of items excluded in the trimmed mean was +10.6% in Nov, with the bigger items consisting of healthcare, utilities, and financial services. The weighted average inflation rate of items excluded in the bottom tail was -5.1%, providing a much smaller deflationary offset. The asymmetric nature of this inflationary impulse shows that while inflation in the middle of the distribution has cooled, inflation is not yet out of the woods.
- Median PCE Inflation: Helping to confirm this trend, the median inflation rate also slowed notably over the last two months to +2.9% in Nov – the first time below +3% in this cycle. The median measure is more robust to outliers, and the fall in the median rate indicates that inflation through the middle part of the distribution moved lower and has slowed.
While this is developing into a more constructive backdrop for the Fed, the tariff shadow remains. The Fed will consider anecdotes from the latest Beige Book over ‘pre-tariff’ inventory depletion leading to risks of price increases, as well as the seasonal corporate price increases through the start of 2026.
US Growth Resilience and Stalled Hiring
Growth through the back half of 2025 remained resilient. Last week, the second estimate of US GDP growth in Q3 was revised slightly higher to +4.4% (annualized). The updated Atlanta Fed GDP nowcast for Q4 growth also edged higher to +5.4% last week, still with large net export distortions. Much of the small boost to Q4 tracking came from positive construction spending, while positive personal spending and income data for Oct and Nov was largely in line with expectations and made no change to the PCE contribution to growth.
Looking early into 2026, the US S&P flash PMI suggested a more sustained, albeit moderate expansion compared to the faster expansion at the start of Q4. In Jan, manufacturing output improved while services remained steady, though new order growth softened. Firms continued to cite political uncertainty, weak demand, and higher costs as “brakes” on hiring. For the FOMC, the message is clear: resilient growth is not yet translating into a hiring rebound.
Global Flash PMIs Jan 2026 – Mixed Momentum
The Jan PMIs were mixed. The Eurozone recovery remains “feeble” with momentum largely unchanged. Both the UK and Australia saw improved momentum. The UK expansion was led by services and manufacturing, though firms continued to cut costs, weighing on labor demand. Australia saw a notable jump in services activity alongside moderating output prices.
The other notable improvement in conditions was in Japan. The output index reached a 1.5-year high, as manufacturing shifted back to expansion and exports rose for the first time since 2022. While hiring was the strongest since 2019, future output optimism faded as firms noted rising costs, labour shortages, global uncertainty, and an aging demographic.
The BoJ – Tactical Hold
These themes of cost pressures and aging demographics were prevalent in the latest BoJ decision. The BoJ kept its policy rate unchanged at 0.75% as expected – one member dissented for a back-to-back 25bps hike. This was a tactical pause, rather than a change in direction, and maintained the shift towards a more hawkish bias. The Board sees policy settings as remaining accommodative, given “real interest rates are at significantly low levels”. Guidance followed that if the outlook for activity and prices continues to be realised, then the BoJ will increase policy interest rates. Other strategic observations from the decision;
- Growth and inflation forecasts were revised higher in fiscal year 2026, and modestly so in fiscal year 2027, due to rising confidence that the “virtuous cycle” is becoming embedded, as well as expansionary government policy measures.
- The BoJ identified that firms are becoming more comfortable passing on price and wage increases – behaviour that is expected to become more widespread. This is an important signal highlighting a fundamental shift in firms’ price-setting behaviour. In this context, Gov Ueda emphasised sensitivity over currency weakness impacting imported inflation, even from smaller currency moves now. This doesn’t signal a shift in the cadence of hikes, but it does elevate the Yen’s role as a driver of underlying inflation and inflation expectations, distinct from, and in addition to, the now expected underlying domestic wage and output gap drivers.
- The Feb-Apr Window: The Board maintained flexibility on the timing of further rate hikes with no clear commitment to a cadence of rate hikes. Comments in the press conference suggest post-April could be the next possible window for assessment, allowing time to digest the policy implications of the snap election in Feb, as well as Shunto wage negotiations and the seasonal corporate price changes around the Apr period.
Outlook for the week ahead: FOMC & BoC Meetings, Aus Q4 CPI, Euro area GDP Q4
It will be a quieter data week, with the focus shifting back to central bank decisions as the FOMC and BoC meet this week on monetary policy. The Q4 CPI release in Aus will be important for the upcoming RBA meeting next week.
Key factors & events to watch this week:
FOMC Meeting and US Data
- FOMC Decision: Markets are expecting no change to policy settings at the meeting this week. At this stage, markets are not pricing in another cut until Jul (source: CME Fedwatch).
- We continue to expect dissents at this meeting.
- US data this week: Advance Durable Goods Orders for Nov (expecting +0.5% over the month) & Final Factory Orders (Nov), the Conference Board Consumer Sentiment Index for Dec, and the International Trade report for Nov (final) – leading to an update of Q4 growth tracking.
- Also out this week will be the catch-up of the US PPI for Dec, which is currently lagging the CPI reporting. Headline PPI is expected to remain at +0.2% over the month and result in PPI slowing to +2.6% over the year in Dec. Core PPI is expected to stay at +0.3% and result in core PPI slowing to +2.85% in Dec.
Bank of Canada Meeting
- Decision: The BoC is expected to keep policy settings unchanged at 2.25% this meeting.
- The latest CPI report, while reflecting the expected choppiness around prior year base effects, did continue to show easing in the BoC measures of underlying inflation in Dec, with the average of the three measures falling to +2.66% in Dec (from +2.8% in Nov).
- The latest labour market data showed steady employment conditions as the employment rate remained unchanged, but the unemployment rate increased, as more people entered the labour force.
- The Q4 Business Outlook Survey was somewhat downbeat. While conditions had stabilized, firms were only expecting business activity “to improve slightly” going forward, and the majority of businesses were planning to “maintain or decrease current staffing levels”.
Australia CPI – Q4
- Q4 CPI will be an important report for the RBA as it prepares updated forecasts for its next meeting on 3 Feb 2026. There was a notable shift in expectations for the cash rate after the last RBA meeting (from cuts to ‘on hold’, and now to hikes) based on recent firmer inflation and now another fall in the unemployment rate. At the last meeting, the Board discussed the upside surprise to the Q3 CPI report, along with other indicators, suggesting the economy is still operating with some degree of “excess demand”.
- The current RBA inflation forecasts (from Nov 2025) show headline inflation is expected to finish the year at +3.3% and trimmed mean/core inflation at +3.2%.
- The main Q4 trimmed mean (core) rate is expected to increase by between +0.8% and +0.9% over the quarter, keeping the annual rate elevated at around +3.2-3.3% at year’s end.
- After the stronger labour market report for Dec and the notable fall in the Aus unemployment rate last week, market expectations for a rate hike at the Feb meeting increased, though it is not fully priced at this stage.
- Also out this week will be the NAB business conditions and confidence indicators for Dec. These reports include a ‘capacity utilisation’ measure, which was noted by the RBA at the last meeting.
Euro area – prelim GDP for Q4 is expected to increase by +0.3%, with the annual rate slowing to +1.2% (from +1.4% in Q3) – this would end the year below the latest ECB growth projections of +1.4% for the full year 2025.
US Tariff Uncertainty and Legal Rulings: Continued delays in the Supreme Court’s tariff rulings are expected to keep firms on edge.
Fed Governance and Leadership: Markets await the announcement of a new Fed Chair nominee, which could be as early as this week. Fed Governor Miran’s term ends on 31 Jan 2026, but could stay on until a new appointment for the seat is confirmed.
This week, the US Treasury will auction and settle approx. $546bn in ST Bills and 10-year TIPS, raising approx. $82bn in new money. The US Treasury will also auction the 2-year, 5-year, and 7-year Notes this week, which will settle early next week. Approx $13bn in ST Bills will mature on the Fed balance sheet and will be reinvested.
More detail (including a calendar of key data releases) is provided in the briefing document – download the pdf below:
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
by Kim | Jan 19, 2026
The key events for the w/c 19 January 2026: US PCE inflation, Q3 GDP (second est), BoJ meeting, key global CPI reports, prelim S&P PMIs Jan
As data flows normalise, the picture reveals a U.S. economy that is largely steadying, though not yet out of the woods, following the end of the government shutdown, significant trade upheaval, and elevated geopolitical risks. While growth remains resilient and the labor market shows signs of stabilising, these conditions remain sensitive to an environment of heightened geopolitical volatility. A more immediate concern is the potential for renewed uncertainty, especially around tariffs, to upend fragile business and household sentiment just as momentum may be building.
US inflation: Persistence without Acceleration
While the inflation data catch-up is still underway, the trajectory is one of steady consumer inflation, some pockets of rising input prices for producers, and lingering tariff pass-through risks.
Headline CPI for Nov came in as expected at +2.7%, unchanged from Oct, while core CPI edged up slightly to +2.7%. Although monthly rates showed a notable acceleration, this likely reflects distortions from the restart of data collection and a low Oct base. Importantly, the six-month annualised rates are little changed from the annual rates across most measures, suggesting that while inflation has remained persistent, it has not accelerated recently. Other measures of underlying inflation, such as the trimmed mean and the median, have slowed recently, reflecting some easing in inflation through the middle of the distribution.
The PPI for Oct and Nov showed some pressure on input prices for producers. Headline PPI increased to +2.95%, driven by goods prices increasing further to +3.1% (including energy) and construction costs rising to +2.7%. While services PPI remained stable at +2.9%, it has slowed through the year. Importantly, this week we will see how the CPI and PPI flow through into the Fed-preferred PCE inflation measure for Nov. Core PCE is expected to ease slightly to +2.7% in Nov, remaining within the year-end projection of +2.9%.
Ahead of the FOMC meeting next week, the most recent Beige Book for Jan highlighted some inflation risks in the outlook. The last four reports have reported inflation pressure not only from tariffs, but also from higher energy, utility, and insurance costs. While previous reports were mixed regarding the degree of pass-through, the Jan edition flagged risks of rising costs passing through to consumers as pre-tariff inventories are depleted and/or margin pressures mount.
Resilient Economic Activity
While inflation remains steady, yet persistent, it is doing so against a backdrop of surprisingly robust economic output. The latest Atlanta Fed GDP nowcast for the Q4 growth run-rate increased marginally to +5.3% by the end of last week. It’s important to note that just under half of this growth stems from distortions to net exports data (accounting for approx. 2% pts of the overall 5.3% run rate so far this quarter); however, even excluding net exports still leaves a respectable growth picture. The rebound in retail sales in Nov made only a modest, yet positive contribution to personal spending growth, while residential investment saw no net change (a small rise in existing home sales offset the fall in new home sales). Currently, residential investment is detracting -0.2% pts from Q4 growth. This ongoing weakness in the housing market was reflected in a further fall in the NAHB housing market sentiment for new home builders to 37 in Jan, the equal low of this cycle.
The Fed’s Beige Book commentary reflected an improved tone on economic activity in Jan. Regional reports have evolved from “neutral-mixed” in Sep to a “negative” low point in Nov during the shutdown. The latest report reflects slightly positive conditions and an improved outlook, though the view remains bifurcated by industry: consumer spending is being led by higher-income earners in a potential “holiday rebound,” while manufacturing remains mixed across districts.
Labor market stabilization versus fragility
Notably, this resilience in US growth is not translating into a revitalisation of hiring. While the broad labor market data for Dec was somewhat positive, given the fall in the unemployment rate, the Conference Board Employment Trends Index (ETI) for Dec continues to signal underlying weakness. The overall ETI fell in Dec, “reflecting low labor market confidence in the outlook for hiring and job-finding”.
The last four Fed Beige Book reports on the labor market highlighted weaker demand and elevated economic uncertainty affecting hiring decisions. This trend persisted in Jan, though the trend stabilised after the notably negative report in Nov. In Jan, the focus shifted from cutting to operational flexibility; terms like “backfilling vacancies” and “temporary workers” replaced the mentions of “layoffs” seen in the Nov report – a subtle, but positive shift.
Implications for the FOMC
US labor market conditions are likely to remain at the core of the debate for the FOMC next week. The two key Fed speeches last week reflect the current divide among FOMC members.
Fed Vice Chair Jefferson, who supported cuts last year, noted that the labor market appears to be stabilising, and that current policy is consistent with the neutral rate. He signalled a likely ‘hold’ for the next meeting, stating that “the current policy stance leaves us well positioned to determine the extent and timing of additional adjustments to our policy rate”.
Conversely, Vice Chair (Supervision) Bowman was more cautious. She noted that the labor market is still fragile and that policy is still restrictive, suggesting room for more cuts to reach neutral. Bowman argued that the FOMC should avoid signalling a pause until it has identified that labor market conditions have changed, and wants to maintain an “intentionally proactive and forward-looking” approach to policy setting. With markets pricing in a hold at the Jan meeting, Bowman may again dissent at the Jan meeting.
Broader Risks to Sentiment
The start of 2026 has been marked by significant volatility on the political front. President Trump’s weekend escalation regarding new tariff threats against the EU, linked to Greenland negotiations, adds a fresh layer of headline risk as he prepares to speak at Davos this week. These renewed threats may exacerbate general uncertainty for firms, risking a shift from a “fragile” sentiment to a defensive posture that could stall the momentum built in late 2025.
Outlook for the week ahead: US PCE inflation, Q3 GDP (second est), BoJ meeting, key global CPI reports, prelim S&P PMIs Jan
It will be a short week in the US due to the Martin Luther King, Jr Holiday on Monday.
The key focus in the US this week will be PCE inflation, spending, and income data for Nov and the second estimate for Q3 GDP. We are now in the blackout period ahead of the next FOMC meeting next week. Beyond the data, headline risk remains high regarding President Trump’s tariff threats and the ongoing geopolitical friction stemming from his proposal to negotiate the purchase of Greenland.
The BoJ kicks off global central bank meetings for 2026 this week.
Global CPI reports will feature this week: Canada, Japan, the UK, the Euro area (final), and NZ.
Key factors & events to watch this week:
US PCE inflation, spending, and income data for Nov, GDP Q3
Now that both the CPI and PPI for Nov have been released, the Fed’s preferred PCE inflation measure will be updated for Oct and Nov.
- US headline PCE inflation for Nov is expected to increase by +0.2% over the month in Nov. The most recent PCE inflation reading for Sep had increased to +2.8%, and is likely to ease in Nov.
- Core PCE is also likely to ease to +2.7% in Nov, from +2.8% at the last reading in Sep.
- Personal spending in Nov is expected increase by +0.5% in Nov, while personal income is expected to increase by +0.4% over the month in Nov.
- The second estimate for US Q3 GDP is expected to be confirmed at +4.3% (annualised).
Bank of Japan Meeting
- The BoJ is expected to keep policy settings unchanged at the latest meeting, after increasing its policy rate by 25bps to 0.75% at the Dec meeting.
Global CPI reports
- Canada CPI is expected to decline by -0.4% over the month in Dec, while the headline rate is expected to stay unchanged at +2.2% over the year. The BoC core measures of CPI – trimmed mean and median, are both expected to slow from +2.8% in Nov to +2.7% in Dec.
- Euro area headline CPI is expected to be confirmed at +2% over the year in Dec, and core CPI is expected to be confirmed at +2.3% over the year in Dec.
- Both the UK headline and core CPI are expected to increase to +3.3% over the year in Dec, from +3.2% in Nov.
- Japanese National core CPI (ex-fresh food) is expected to ease to +2.4% over the year in Dec, from +3% in Nov.
- NZ for Q4 is expected to slow to +0.5% over the quarter, from +1% in Q3. Headline inflation is expected to stay unchanged at +3%.
The prelim suite of S&P PMIs for key developed markets will be released later in the week, providing the first look at momentum and sentiment at the start of 2026.
Geopolitical and Political Context
Outside of the hard data, several political events will shape the broader macro environment.
Davos and Diplomatic Friction: President Trump is scheduled to attend and speak at the World Economic Forum in Davos this week. While he is expected to talk about US domestic housing policy, his appearance comes on the heels of renewed threats to purchase Greenland, citing “national security” reasons. This is likely to dominate discussions on the sidelines of the summit.
Tariff Uncertainty and Legal Rulings: Continued delays in the Supreme Court’s tariff rulings are expected to keep firms on edge. This legal uncertainty now extends to recent tariff threats levied against European nations.
Fed Governance and Leadership: The Supreme Court is also expected to hear arguments this week relating to whether President Trump can fire Fed Governor Lisa Cook. This decision could have long-term implications for the central bank, potentially redefining legal standards for the removal and tenure of board members. Meanwhile, the market awaits the announcement of a new Fed Chair nominee; notably, reports suggest that Kevin Hassett, previously a leading contender, may have been ruled out.
This week, the US Treasury will auction and settle approx $555bn in ST Bills, raising approx. $34bn in new money. The US Treasury will also auction the 10-Year TIPS and 20-Year Bond this week. Approx $34bn in ST Bills will mature on the Fed balance sheet and will be reinvested.
More detail (including a calendar of key data releases) is provided in the briefing document – download the pdf below:
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
by Kim | Jan 12, 2026
The key events for the w/c 12 January 2026: US CPI, PPI, retail sales, and Fed speeches
Last week’s data continued to reflect the core tension in the US economy: a “low-dynamism” labor market persisting alongside resilient top-line economic activity. While the fall in the unemployment rate in Dec reversed the notable increase in Nov, the data still suggests a labor market stuck in a low-hiring/low-firing gear and, for now, keeping labor market risks elevated for the Fed. Amid these vulnerabilities, measures of activity through Q4 have so far remained resilient, albeit with pockets of weakness persisting in housing and manufacturing.
The Labor Market: A State of Low Dynamism
Importantly, the low firing environment remained intact in Dec. The unemployment rate declined to 4.4%, fully reversing the concerning spike to 4.6% in Nov. At the same time, the employment-to-population ratio increased back up to 59.7% (rebounding from the YTD low of 59.6%). This stability was also echoed in a similar fall in the unemployment rate within the core working age group (25-54yrs), where the unemployment rate fell back to 3.65% while the employment-to-population ratio returned to a YTD high of 80.7%. Secondary data also supported the low-firing theme. Layoffs in the JOLTS report fell back down at the end of Nov, initial jobless claims remain low while tracking seasonal shifts, and private-sector job cut announcements also eased at the end of the year.
At the same time, the low hiring reality remained entrenched. US non-farm payroll growth slowed to 50k in Dec, compounded by net revisions of -75k for the prior two months. While some of these revisions could be tied to non-cyclical declines in government payrolls, the broader trend was undeniable: annual payroll growth has more than halved over the last year, falling from +1.3% in Dec 2024 to +0.4% in Dec 2025. The slowdown was broad-based across service-providing jobs, government, and goods-producing payrolls. The JOLTS survey also showed the hiring and job opening rates falling to an equal YTD low at the end of Nov.
Implications for the Fed: thoughts on the underlying causes of this labor market stagnation were captured in the recent Fed minutes:
“Participants generally viewed the low dynamism in the labor market as reflecting both lower labor demand amid economic uncertainty… and decreased labor supply associated with lower immigration, the aging population, or reduced participation.” Source: FOMC Minutes 9-10 Dec 2025
Late last year, the Fed explicitly prioritized stabilizing the labor market risks with a series of three (3) risk management rate cuts. With the unemployment rate falling in Dec, markets have pushed expectations for the next rate cut out to Jun 2026 (source: CME Fedwatch). However, the FOMC is likely to remain cautious about the risks to the labor market.
Growth and Activity Indicators Show Some Resilience
In stark contrast to the stagnant labor market, headline growth remains surprisingly resilient.
- The productivity bridge: The Q3 productivity and unit labor costs report was notable for the substantial increase in productivity of +4.9%, which was well above the annual trend. While this is a volatile measure quarter to quarter, the report highlighted how output growth remained strong at +5.4%, despite stagnant job growth. The report also noted that unit profits increased by +6.6% while real compensation for workers decreased by -0.2%. However, this highlights the headwinds for ongoing spending and growth if productivity gains don’t eventually translate into real wage growth.
- Mixed PMI signals: The Dec PMIs showed diverging paths. The S&P surveys showed some slowing of momentum going into year-end, yet both manufacturing and services activity continued to expand at a moderate pace. However, the ISM surveys painted a stark contrast between the manufacturing sector losing steam amid a more negative business backdrop, while services’ momentum continued to strengthen into year-end.
- GDP tracking for Q4: The Atlanta Fed GDPNow tracker ended the week at a +5.1% growth run-rate so far for Q4. While impressive, the notable increase last week was mostly the result of distortions from net export data. Underlying this growth, consumer spending remained steady, while slower housing starts in Nov were a drag on growth.
The central question for the 2026 outlook is whether this “resilient activity” will eventually pull hiring back up, or if the lack of labor market dynamism will eventually begin to feed on itself, creating a broader drag on the US economy.
Australian Inflation Pulse and the RBA
The Aus monthly CPI series showed all three inflation measures remaining above the top of the target 2-3% band; however, headline inflation moved lower to +3.4% this month (from +3.8% in Oct). There was some relief with the monthly trajectories shifting lower, but the question for the RBA will be whether this is a durable change in trend, given the higher monthly rates since Jul 25. The RBA will continue to place more weight on the Q4 quarterly CPI report due out in several weeks. Markets maintained pricing for a hold in the cash rate in the near-term (source: ASX Rate Tracker at 9 Jan 26).
Outlook for the week ahead: US CPI, PPI, retail sales, and Fed speeches
It will be another full week of US data catch-up and the last week of Fed speeches leading up to the FOMC meeting on 27-28 Jan.
US data will add to the inflation picture for Dec, but note that data is likely to remain noisy given the timing challenges related to the restart of data collection. Retail sales for Nov will add the important consumer spending element to growth tracking so far in Q4.
Outside of the data, the US Supreme Court may release its ruling this week (14 Jan) on President Trump’s use of ‘emergency powers’ to impose tariffs. We are also awaiting the announcement of the new Fed Chair nominee.
Key factors & events to watch this week:
US inflation data: CPI for Dec, PPI for Nov, and catch-up of import and export price indexes.
US inflation data continues to catch up after the end of the government shutdown – especially for PPI data this week. The CPI for Dec may contrast with the notably softer Nov reading, which may have been subject to distortions from the restart of data collection.
- US headline CPI Dec is expected to increase by +0.3% over the month. The annual headline rate is expected to stay unchanged at +2.7%.
- Core CPI is expected to increase by +0.3% in Dec, while the annual rate is expected to increase to +2.7% in Dec, from +2.6% in Nov.
- The PPI data for Oct and Nov will be released this week, together with the import and export price indexes.
US Q4 growth inputs: retail sales and existing home sales.
- US retail sales are expected to increase by +0.4% in Nov, up from 0% in Oct. The control group retail sales figure will be in focus as it feeds into the GDP calculation – and this measure was strong in the prior month, up +0.8%.
- US existing home sales are expected to remain subdued in Dec, but still rising to 4.2m (annualized), up from 4.13m in Nov.
Fed speeches: This is the final week of speeches before the blackout period commences next week, ahead of the first FOMC meeting of the year on 27-28 Jan.
- Two important speeches this week will be on Fri 16 Jan. Fed Vice Chair Jefferson and Vice Chair (Supervision) Bowman will both speak on the economic outlook. This is usually an important topic for any policy signalling ahead of the next FOMC meeting.
- Fed Chair Powell released a firm video statement late on Sunday in response to the Trump administration serving grand jury subpoenas to the Fed last week. There are many implications of this escalation in action by the Trump administration targeted at the Fed – among them, this legal friction may delay or alter the succession timeline. There may be some headline risk around that this week.
This week, the US Treasury will auction and settle approx $586bn in ST Bills, Notes, and Bonds, raising approx. $11bn in new money. Approx $43bn in ST Bills & TIPS will mature on the Fed balance sheet and will be reinvested.
More detail (including a calendar of key data releases) is provided in the briefing document – download the pdf below:
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
by Kim | Jan 5, 2026
The key events for the w/c 5 January 2026: US non-farm payrolls, ISM PMIs, Aus CPI (monthly), S&P PMIs for Dec
The new year opens with a focus on reorientation as the US catches up on delayed data releases over a mostly quiet holiday period. We start the year, however, with further developments in the geopolitical backdrop as the US has now moved to depose the Venezuelan leader over the weekend. These developments warrant observation for their potential impact on broader market stability. Nevertheless, the primary task for markets this week is building out the final view of US economic activity for the close of 2025.
There are several important updates in the week ahead.
US Labor Market Dec: FOMC Implications
The updated suite of US labor market data for Dec will arguably be the most important input in the lead-up to the FOMC meeting at the end of the month. At the time of writing, markets are leaning toward a hold in Jan, with a slight skew to a cut in Mar (Source: CME FedWatch). The Fed’s sensitivity to a weakening labor market remains high. If the unemployment rate continues to increase beyond 4.7%, then we could see rate-cut expectations brought forward. The latest FOMC minutes reiterated the importance of managing the downside risks around the labor market.
Assessing the US Growth Trajectory: Q3 Resilience
The US data catch-up continues this week with housing data for Sept and Oct, alongside US trade figures. Looking back, US Q3 growth demonstrated resilience, with headline GDP accelerating to an annualized +4.3% (up from +3.8% in Q2). This growth was driven by higher personal spending growth, helping to offset a slowdown in fixed investment and continued weakness in the residential sector. While government spending provided a tailwind in Q3, the outlook for Q4 remains clouded by the government shutdown. We expect a dip in the final quarter of 2025, followed by a Q1 rebound.
The data catch-up also means that the Atlanta Fed GDP nowcast will be updated for Q4. So far, and based on limited data, the nowcast for the Q4 GDP growth run rate has started at +3%. The nowcast for Q4 GDP growth is expected to be finalized at the end of Jan.
Global Momentum: PMIs and Global Manufacturing Wanes
As we close out 2025, this week’s US ISM and final S&P Global PMIs will provide some insight into year-end momentum. Early data suggests that while global manufacturing momentum remains in positive territory, the pace of expansion waned during the final two months of Q4. The focus now shifts to whether services can maintain the heavy lifting.
Australian Inflation Pulse and the RBA
Outside of the US, the Aus monthly CPI for Nov will be important. While the RBA remains focused on the quarterly CPI result for Q4 (due 28 Jan), the new monthly series may offer an important directional guide. The RBA is navigating concerns that inflation risks may be tilting to the upside; however, the recent minutes emphasized that it was still too early to determine whether this recent uptick in inflation would be persistent. Expectations for the policy rate have shifted to a hold in the near-term, but are now skewed towards potential hikes in the outlook (Source: ASX Rate Tracker at 2 Jan 26).
Policy Watch: A New Era at the Fed
Finally, the transition in FOMC leadership is front-of-mind as we move forward in 2026. The announcement of a new Federal Reserve Chair is imminent, and markets should be prepared for the potential shift in priorities, communication style, and culture that a change at the top may bring.
Key factors & events to watch this week: US non-farm payrolls, ISM PMIs, Aus CPI (monthly)
US labor market data for Dec
A quick recap: the Nov labor data showed some further softening in conditions, though the data was mixed. Some of the larger-than-expected increase in the unemployment rate could be attributed to temporary layoffs; however, slower employment growth was also a factor.
- Non-farm payroll growth is expected to remain modest at 57k in Dec, little changed from 64k in Nov.
- The unemployment rate is expected to edge back down to 4.5% after increasing notably in Nov to 4.6%.
- Participation is expected to be little changed at 62.5%, while average weekly hours worked is expected to be unchanged at 34.3.
- Job openings at the end of Nov are expected to be 7.65m, down slightly from 7.67m in Oct.
- The Challenger Job Cut Announcements survey for Dec is expected to show little change from the 71k announcements in Nov.
- Initial jobless claims for the week ending 3 Jan are expected to increase to 216k (from 199k in the week prior). Continuing claims have been moving lower in the weeks since the end of the US government shutdown, falling to 1.866m in the latest week ending 20 Dec.
US Q4 growth inputs: ISM PMIs Dec, housing data catch-up, trade
- The manufacturing and services PMIs are expected to be little changed in Dec at 48.3 and 52.3, respectively. Key indicators in focus will be the direction of demand/orders, employment, and prices.
- Housing data catch-up (Sept & Oct): New housing permits are expected to come in around 1.34m on an annualized basis in Oct – remaining subdued. New housing starts are also expected to remain subdued at 1.31m in Oct.
Aus monthly CPI for Nov
This is now the second release of the new, complete monthly CPI series. It’s still early in the transition from the quarterly CPI series to the monthly series, so the RBA will continue to use the quarterly report.
- The uptick in monthly headline inflation in Oct to +3.8% was notable, up from +3.6% in Sept. The core/trimmed mean also increased to +3.3% in Oct from +3.2% in Sept. We’ll be looking for the direction of movement in Nov to see how it impacts the quarterly outlook. The latest RBA forecast has Q4 trimmed mean CPI running at +3.3% over the year, which, so far, aligns with the monthly core inflation for Oct.
Euro area CPI – prelim for Dec
- Headline CPI for the Euro area is expected to remain unchanged at +2.1% in Dec, and core CPI is also expected to remain unchanged at +2.4% in Dec.
Canada labour market Dec
- The recent improvement in labour market conditions is expected to stall this month. Employment growth is expected to fall by -5k in Dec, after rising by +53.6k in Nov. The unemployment rate is expected to edge higher to 6.7% in Dec (from 6.5% in Nov).
S&P Global PMIs: The final composite and services PMIs for Dec will be released early this week.
This week, the US Treasury will auction and settle approx $467bn in ST Bills with a paydown of $25bn. Approx $13bn in ST Bills will mature on the Fed balance sheet and will be reinvested.
More detail (including a calendar of key data releases) is provided in the briefing document – download the pdf below:
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
by Kim | Dec 22, 2025
The key events for the w/c 22 December 2025: Christmas Holiday week, US Q3 GDP, RBA Minutes
The Recap from Last Week: ECB, BoE, and BoJ Decisions
The final three major central bank decisions of the year reinforced the theme of policy divergence as policymakers navigate specific domestic pressures. The ECB maintained a “watchful neutral” stance, while the BoE delivered a fragile cut – a move that underscores a shift to more gradual easing, with future decisions likely to remain a “closer call”. Meanwwhile, the outlier Bank of Japan hiked rates to a 30-year high as it continued to normalise policy after decades of excess accommodation.
As we look to 2026, the path of Fed rate policy – the key global anchor – will remain important for markets. The question of ‘more or fewer cuts’ in 2026 is contingent on a labor market already testing the Fed’s ‘line in the sand’, inflationary crosscurrents from a new trade regime, fiscal stimulus, and a change in Fed leadership.
The final three decisions: ECB, BoE, and BoJ
- ECB: A Watchful Neutral – The Governing Council delivered a unanimous hold, keeping the deposit facility rate at 2%. While growth forecasts were revised slightly higher, services inflation is likely to remain sticky. With settings at a roughly neutral level, the ECB remains cautious, citing an uncertain international environment. Forward guidance remained suspended as ECB President Lagarde noted that it was also a “unanimous decision to keep all optionalities on the table and stick to a meeting-by-meeting approach” due to the high degree of global uncertainty.
- BoE: A Fragile Cut – In another razor-thin 5-4 decision, the BoE cut the Bank Rate by 25bps to 3.75%, with Governor Bailey acting as the swing voter. While upside risks to persistent inflation have eased, the risk to medium-term inflation from weaker demand has remained. Recent inflation reports have come in lower, while demand remains subdued and slack is building in the labor market. Inflation is expected to fall back target more quickly in the near-term. Guidance shifted – while the bias to cutting remained, further easing is likely to progress on a gradual path, with decisions becoming a “closer call”, and conditional on the inflation outlook.
- BoJ: Removing Excess Accommodation – The BoJ hiked by 25bps to 0.75%, a 30-year high. This unanimous decision reflects rising confidence in achieving the 2% inflation target. Importantly, the bridge between inflation and growth – the wages outlook – is expected to be maintained. However, the Spring wage negotiations remain the key risk to the outlook. Policy settings are seen as remaining accommodative – with the BoJ noting that the “significantly negative” real interest rate level is still supporting the economy. Guidance set up a clear bias toward further hikes, conditional on achieving inflation and growth outcomes, while “the chances of that happening are increasing”. While this was a more hawkish decision and tone, the immediate market reaction was a selloff in long JGB’s (the 10-year breaching 2%) and the further weakening of the Yen, which suggested markets may have expected more.
US Data – Setting the Tone for 2026
While these central bank decisions illustrate a global landscape of policy divergence, the FOMC remains the key anchor for markets in the year ahead. This week, markets were focused on the catch-up of key US labor market and inflation data – and importantly, what it could mean for the Fed’s rate path. Despite the weaker labor market data and softening CPI, market pricing for the FFR remained little changed over the week. This suggests that markets were looking past some of the distortions and waiting on the Dec data to help decipher temporary shutdown-related noise from a more fundamental cyclical shift.
1. The Labor Market: Mixed Signals and Shutdown Echoes
In our assessment of the Dec FOMC decision, Fed Chair Powell seemed to indicate that an uptick of more than two tenths in the unemployment rate (to 4.7%) could be a line in the sand for the Fed leading up to the Jan meeting. In the Nov labor market report, the unemployment rate started to approach that threshold, ticking up to 4.6% – higher than expected. Some of the uptick in unemployment appeared to be due to “temporary” layoffs, suggesting that this higher unemployment rate may not be enduring. While the increase in the unemployment rate was partly the result of higher participation, slower employment growth also contributed. The employment to population ratio for the 16yrs+ group fell to a post-pandemic low of 59.6%, while conditions in the core working-age group also seemed to soften.
Payroll growth rebounded in Nov to +64k after the notable fall of -157k in Oct, distorted by the shutdown and the deferred falls in government payrolls. Private payroll growth has remained positive over the last three months, and increased to +69k in Nov (with the 3-month avg now up to +75k). The private payroll diffusion index improved to >50 (reaching 55.2), suggesting some positive broadening in payroll growth across industries.
Another bright spot was the continued solid growth in aggregate hours worked. Hours worked increased by +0.3% over the month, and remained fairly steady over the year at +0.8% growth. This pace of aggregate hours suggests some stability in activity underlying the labor market noise.
2. US CPI Catch-Up
The inflation data, while lacking a month-on-month trend due to the Oct gap, showed a notable deceleration. Headline CPI slowed to +2.7% (down from 3% in Sept), and Core CPI dropped to +2.6%. While the Fed will likely remain sceptical of this data until the gaps are cleared, the downward trajectory was notable.
Further delays in inflation data could mean that the Fed may not have a clearer inflation picture until the Mar meeting. The PPI for Nov is postponed until 14 Jan, which means the Fed-preferred PCE inflation report for Nov will also be delayed – awaiting an updated release date. At this stage, the next complete PCE inflation report for Dec is not scheduled until 31 Jan, after the next Fed meeting on 27-28 Jan 2026.
3. The US prelim S&P PMIs Dec – Momentum Slows amid price pressures
The Dec PMI survey shows composite output momentum slowing, but the expansion remaining moderate. That said, there were several points of caution in the report, starting with a smaller increase in orders and a pullback in confidence. Marginal employment growth, led by the previously stronger services sector, was notable, constrained by concerns over costs, lacklustre demand, and uncertainty over the economic outlook. The PMI report also noted that price pressures “intensified noticeably” and services inflation was “the steepest in three years” – which was also reflected in rising selling prices.
Outlook for the week ahead: Christmas Holiday week, US Q3 GDP, RBA Minutes
It will be a shorter week this week, with the Holiday season now upon us.
There will still be several key US data releases – including the delayed US Q3 GDP.
Key factors & events to watch this week:
US data
- The delayed Q3 GDP will be released this week, and growth is expected to edge lower to a still elevated +3.2% annualized rate, down from +3.8% in Q2.
- Durable Goods Orders for Oct will be released this week, expecting a +0.4% increase over the month.
- Industrial Production for Oct & Nov will be released this week.
- The Conference Board Consumer Confidence survey for Dec should capture any rebound/shift in sentiment after the end of the government shutdown.
- Initial jobless claims for the week ending 20 Dec are expected to be little changed at 225k (from 224k in the week prior).
The RBA minutes of the Dec meeting will be released. Of particular interest will be the detail of the discussion noted in the press conference around how conditions would need to evolve if rates “had to rise again at some point next year”.
This week, the US Treasury will auction and settle approx $545bn in ST Bills and FRNs with a paydown of $18bn. The US Treasury will also auction the 2-year, 5-year, and 7-year Notes this week, to settle on 31 Dec.
Approx $14bn in ST Bills will mature on the Fed balance sheet and will be reinvested.
More detail (including a calendar of key data releases) is provided in the briefing document – download the pdf below:
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
Thank you to all of our valued clients, readers, and friends for your support and friendship in 2025. We sincerely wish you the very best for a wonderful and peaceful holiday season and a healthy, happy, and prosperous 2026.
