by Kim | Feb 16, 2026
The key events for the w/c 16 February 2026: US PCE inflation, Q4 GDP, & FOMC Minutes, Global CPI data, RBNZ Policy Meeting, S&P Prelim PMIs Feb
Macro Recap: Constructive Data for the Fed Mandate
US data last week provided a solid update to the Federal Reserve’s “balance of risks”. The results reflected a constructive shift on both sides of the mandate: disinflation in the CPI continued, though it is not yet back to the 2% target, while signs of stabilization in the labor market helped to alleviate more immediate concerns over near-term weakness. While these trends remain to be fully confirmed, both metrics moved in the right direction, providing a constructive enough backdrop to keep the Fed on hold. The broader context for Q4 growth did shift lower, as weak retail sales in Dec confirmed a softer spending trajectory to end the year. However, the outlook remains resilient, especially given the Fed’s existing expectation for a shutdown-related disruption to Q4 activity.
US Labor Market: Signs of Stabilizing
The Jan labor report likely aligns with the Fed’s view of signs that the labor market is stabilising. This was seen across several key indicators in Jan:
- Non-farm payrolls increased by a notably higher-than-expected +130k, with only a minor downward revision to the prior month. This marked the largest increase in non-farm payrolls since Dec 2024. The gains were led by the private sector (+172k in Jan), while government payrolls contracted by -42k. While the private hiring trajectory has been more encouraging since the shutdown, the direction of future revisions will be important in determining if this forms an enduring trend.
- After the annual benchmark revisions, the annual growth in private payrolls for 2025 was revised from +733k to +367k, bringing the data in line with the weaker labor market conditions throughout the year.
- The unemployment rate edged lower to 4.3%, despite an increase in participation. This is a welcome undershoot of the latest Fed projection of the year-end unemployment rate of 4.5%.
- Growth in hours & wages supported nominal income growth in Jan. Average weekly earnings growth rebounded in Jan to +0.4% (from a softer 0% in Dec), while aggregate hours worked increased by a solid +0.4% in Jan (after a fall of -0.2% in Dec). Growth in hours aligns with some of the stronger activity (output) reports for Jan.
Retail Sales: Real Spending Slowdown in Q4
While the stabilizing labor market supported the income side of the equation for Jan, the consumption side showed a more cautious, trend-like deceleration in Dec.
- Nominal stalling: Headline nominal retail sales growth stalled in Dec after increasing by +0.6% in Nov. The result was led mostly by a fall in motor vehicle sales and smaller falls in clothing, misc., and foodservice.
- In real terms, sales fell by -0.3% in Dec, after increasing by +0.4% in Nov – which brings the Dec qtr change to -0.2% in real terms, versus +0.6% in the Sept qtr.
- GDP Implications: This softer spending result aligns with the Fed’s expectation of a shutdown-related slowdown. Consequently, the contribution from consumer spending in the Atlanta Fed’s GDPNow forecast for Q4 was reduced, with the overall growth run rate slowing to +3.7% in Q4.
Jan CPI: Downside Surprise Amid Underlying Stickiness
- Headline CPI was lower than expected, slowing to +0.2% over the month in Jan (expecting +0.3%) and slowing to +2.4% over the year in Jan (from +2.7% in Dec). The main contributors to the headline annual deceleration were the fall in gasoline and used car and truck prices.
- Core CPI came in as expected, accelerating to +0.3% over the month (from +0.2% in Dec), while annual core CPI slowed to +2.5% in Jan (from +2.7% in Dec). The fall in used car prices slowed core goods inflation to 0% in the month, which was more than offset by an increase in core services inflation, possibly related to annual corporate price increases.
- Underlying Trends: The relatively higher trimmed mean (+2.7%) and median (+3.0%) inflation rates suggest that underlying pressure remains stickier than the core CPI indicates. In other words, there is still some persistence in underlying inflation through the middle of the distribution. Both measures, however, remain on a clear disinflationary trajectory.
While the larger improvement in CPI since Sept could be related to the restart of the data collection post-shutdown disruption, the broader disinflation trend remains in place. The focus now shifts to how the Fed’s preferred PCE price index evolves; the Dec PCE inflation data due this week is expected to show some firming. For the moment, market expectations for a Jun rate cut remain unchanged (source: CME Fedwatch).
Outlook for the week ahead: US PCE inflation, Q4 GDP, & FOMC Minutes, Global CPI data, RBNZ Policy Meeting, S&P Prelim PMIs
The coming week presents another important slate of US data as we close out the 2025 picture. While Jan’s CPI provided a welcome reprieve, the upcoming Fed-preferred PCE report for Dec is expected to reflect a firmer year-end inflation profile. Personal income and spending data will feed into the Advance Q4 GDP report, which is expected to offer a view of resilient economic activity despite the government shutdown disruption. This combination of sticky inflation and resilient growth data doesn’t necessarily shift the goalposts for the Fed, but it does reinforce the “solid” economic conditions. Rather than signalling a pivot, these prints would likely confirm that the Fed can afford to remain patient, as the lack of a growth “cliff” removes the urgency for aggressive easing. Globally, the focus shifts to Jan CPI reports for the UK, Canada, and Japan, while the Feb prelim S&P PMIs will provide further insight into momentum across key markets at the start of the new year.
Key factors & events to watch this week:
US PCE Inflation (Dec) will be a key report for the Fed and is expected to show inflation remaining firm at the end of 2025.
- Headline PCE inflation is expected to increase by +0.4% in Dec, up from +0.2% in Nov. Over the year, headline inflation is expected to increase to +2.9%, up from +2.8% in Nov.
- Core PCE inflation is expected to increase by +0.3% in Dec, up from +0.2% in Nov. Annual core PCE inflation is expected to increase by +3% in Dec, up from +2.8% in Nov.
- The current FOMC year-end projection for core PCE inflation is +3%.
US growth at year-end 2025
- The advance estimate for Q4 GDP in 2025 is expected to be +2.8% annualized, down from +4.4% in Q4. This would translate into year over year growth of +2.6% at the end of 2025, well above the current Fed projection for year-end growth of +1.7%.
- Personal spending growth for Dec is expected to slow to +0.4% from +0.5% in Nov.
- Personal income growth for Dec is expected to be +0.3% in Dec, unchanged from +0.3% in Nov.
- Durable Goods Orders for Dec are expected to fall by -1.8% after the stronger +5% in Nov.
- Housing data will continue to catch up with Building Permits and Housing Starts for Nov and Dec to be released this week.
FOMC Minutes & Fed speeches
- The minutes of the Fed meeting in Jan will be released this week. At the last meeting, the Fed kept rates on hold while signalling a subtle realignment in the balance of risks to its mandate. Two Committee members dissented.
- There will be several Fed speeches this week – though none so far on the economic outlook.
Global CPI reports (Jan)
- Canada’s CPI for Jan is expected to increase to +0.1% over the month after falling by -0.2% in Dec. Over the year, headline inflation is expected to ease back from +2.4% as the base effects from last year’s GST holiday fall away. BoC measures of core inflation: trimmed mean is expected to continue to moderate to +2.6% in Jan, from +2.7% in Dec, while the median is expected to remain unchanged at +2.5%.
- UK CPI is expected to ease to +3% in Jan, from +3.4% in Dec, while core CPI is expected to continue to ease to +3.1% in Jan, from +3.2% in Dec. The latest BoE inflation forecasts show a faster return to the 2% target.
- Japan’s National Core CPI (ex-fresh food) for Jan is expected to slow to +2% over the year, from +2.4% in Dec. This slowing is in line with BoJ expectations that inflation will slow to below 2% in H1 2026, due to “waning food prices”, while the latest inflation forecasts were upgraded.
Australia – RBA Minutes & Labour Market for Jan
- The minutes of the latest RBA meeting will be released this week, providing some insight into the decision to hike the cash rate by 25bps.
- The Jan labour market survey is expected to show somewhat softer employment growth of +20k this month (from +65k in Dec), and the unemployment rate to edge back up to a still historically low 4.2%. Growth in the Q4 wage price index is expected to be unchanged at +0.8%.
The RBNZ will meet for the first time this year, under the new leadership of Governor Breman. The RBNZ is expected to stay on hold at 2.25%.
Finally, the suite of global prelim S&P PMIs will be released for Feb, providing insight into whether the Jan expansion was maintained.
This week, the US Treasury will auction and settle approx $700bn in ST Bills, Notes, and Bonds, raising approx. $84bn in new money. The US Treasury will also auction the 20-year Bond and 30-year TIPS this week. Approx $50bn in ST Bills, Notes, and Bonds 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 | Feb 9, 2026
The key events for the w/c 9 February 2026: US Labor Market, Retail Sales, and CPI
Macro Recap: Funding Lapse & Postponed US Labor Data
Due to the lapse in US government funding early last week, the release of the US non-farm payrolls and broader employment report for Jan were postponed to this week. In the absence of this more consequential data, attention shifted to softening second-tier US labor metrics and the gap between resilient business surveys and a cooling labor market.
The week was also characterized by the trio of key central bank decisions, which highlighted a growing divergence in policy outlooks.
Softer Labor Market Metrics for January So Far
While awaiting the full January report, a range of softer metrics reinforced the “low-dynamism” setting of the US labor market.
- JOLTS: The Dec survey showed a notable fall in job openings to 6.5m and a revision lower to Nov. The job opening rate fell to 3.9 in Dec – the lowest since the onset of the pandemic (after reaching a brief low of 3.4 in Apr 2020). Falling job openings have acted as the key ‘shock absorber’ for the Fed as it aimed to cool wage pressure while keeping unemployment low in this cycle. However, with openings relative to the number of unemployed persons falling below a 1:1 ratio (in Dec), the risk of a more notable deterioration remains high. Underlying the fall in job openings, there was a small improvement in hiring relative to separations but no change overall to the low-hiring, low-firing environment.
- Challenger Report: The Jan report saw another large increase in job cut announcements, reversing the more subdued readings from the prior two months. Also concerning was the drop in hiring plan announcements, which fell to the lowest level since the survey started in 2009.
US PMIs: Output and Employment Disconnect
The Jan PMI surveys highlighted the ongoing disconnect between the robust expansion in output and the tepid employment response.
- Manufacturing and Services: Both surveys recorded jumps in output and demand growth, while hiring momentum was yet to follow. Selected industry commentary remained downbeat – especially in manufacturing.
- Price indexes remained elevated, highlighting more persistent inflationary pressure, though the Jan impulse could be seasonal.
- Sentiment risks remain. Positive sentiment from lower interest rates and government support continues to be offset by tariff-led inflation and political uncertainty stalling consumer spending at the start of the year.
Central Bank Divergence: RBA, BoE, and ECB
Inflation served as the primary axis of divergence among central bank decisions this week.
RBA – Tapping the Brakes (Hike to 3.85%)
The RBA delivered a unanimous 25bps hike in response to concerns of higher and persistent inflation. The Board flagged “excess demand” and signalled that financial conditions may not be as restrictive as previously thought. The projected return to its inflation target has been pushed out to 2028. Forward guidance was again suspended due to high uncertainty over the persistence of inflation. The RBA is remaining in a data-dependent stance, ruling “nothing in or out” regarding future moves.
BoE – A Dovish Hold (3.75%)
The razor-thin 5-4 decision to hold reflects a delicate balancing act. The Committee is weighing the risk of easing too much before inflation is sustainably back to target against the risk of easing too little, now that economic slack is judged to be widening amid a subdued outlook for demand. Despite the decision to stay on hold, the Committee is expecting a faster return to the inflation target from April. Guidance was clear: based on current evidence, the Bank Rate is likely to be reduced further. Judgements around further easing will become (or, remain) a closer call.
ECB – Watchful Hold (2%)
The ECB maintained current policy settings, signalling they are in a “good place” with inflation remaining consistent with the 2% medium-term inflation target. With no reduction in its assessment of broader risks, specifically regarding tariffs and geopolitical shifts, ECB guidance remained suspended. In the absence of new forecasts, the ECB is focused on the evolution of services inflation and wage growth to confirm that the disinflationary trend is enduring.
Outlook for the week ahead: The Big Three – US NFP’s, Retail Sales, and CPI
This is a significant week for U.S. macro data, covering the “big three”: non-farm payrolls & the employment situation, household spending, and inflation. While the FOMC remains on hold for now, these upcoming data points will provide a critical update to the Fed’s ‘balance of risks’ regarding its dual mandate, and could shift market expectations for the timing of the next rate cut.
Key factors & events to watch this week:
US Labor Market (Jan) and Annual Benchmarking
The labor market remains a primary focus following the FOMC’s shift characterizing labor market conditions as “stabilizing”. Any clear deviation from the ‘stabilizing’ trend would likely force a re-evaluation of the current ‘on hold’ stance well before the market’s expected Jun cut window.
- Non-farm payroll growth is expected to rebound to +70k in Jan, from +50k in Dec.
- The annual benchmarking process and updated seasonal adjustment factors are likely to complicate the view of the labor market and are expected to show a downward revision to payroll growth.
- The unemployment rate is expected to be unchanged at a low 4.4%.
- Average weekly hours are expected to be unchanged at 34.2 hours.
- Average hourly earnings are expected to slow to +3.6% in Jan from +3.8% in Dec.
- The Employment Cost Index for Q4 is expected to increase by +0.8% (from +0.8% in Q3).
- After ticking up to 231k last week, initial jobless claims are expected to fall back to 222k for the week ending 7 Feb.
US Retail Sales – Dec
- Headline retail sales growth is expected to slow to +0.4% in Dec from +0.6% in Nov. The retail control group (which factors into the GDP calculation) increased by +0.4% in Nov and is expected to remain little changed.
US Inflation – CPI Jan
- Annual headline and core CPI are expected to moderate in Jan. Headline CPI is expected to increase by +0.3% over the month in Jan, from +0.3% in Dec. The annual rate is expected to slow to +2.5% in Jan, from +2.7% in Dec.
- Core CPI is expected to increase by +0.3% over the month in Jan, from +0.2% in Dec. Annual core CPI is expected to slow to +2.5% in Jan, from +2.7% in Dec.
US Fed Speeches
- There will be a wide range of Fed speeches this week. Of note will be Fed Governor Waller: while his topic is ‘digital assets’, he may speak on the economy.
This week, the US Treasury will auction and settle approx. $525bn in ST Bills, raising approx. $62bn in new money. The US Treasury will also auction the 3-year Note, the 10-year Note, and the 30-year Bond this week, to settle next week. Approx $16bn 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 | Feb 2, 2026
The key events for the w/c 2 February 2026: US Labor Market, Central Bank Meetings: RBA, BoE, and ECB, S&P Global PMIs Jan
Macro Recap: Fed Leadership Change & Policy On-Hold
Late last week, the impending change in Fed leadership came into sharp focus with the announcement of Kevin Warsh as the nominee to succeed Fed Chair Powell in May. Markets have begun to digest the implications of this change in Fed leadership for the policy outlook. The change is underscored by a Fed that remains in a delicate holding pattern; while the Jan FOMC meeting saw a second consecutive pause, two dissents highlighted the continued internal debate over the balance between labor market and inflation risks.
The FOMC Hold & Dissent
This leadership announcement arrived after the FOMC signalled a tactical shift in its assessment of the labor market. While the FOMC kept policy settings unchanged as expected, the decision was not unanimous. Governors Waller and Miran dissented, preferring another 25bps rate cut at this meeting. With policy rates now within a ‘plausible range of neutral’, the committee maintained that policy was “well positioned” to calibrate future adjustments, reinforcing market expectations of an extended hold here until the Jun meeting.
The decision to hold hinges on a subtle realignment of the balance of risks to the Fed’s mandate. The Fed now views activity as expanding at a “solid” pace and inflation as “elevated,” but crucially sees the labor market as “stabilizing.” Chair Powell acknowledged this delicate transition during the Q&A:
“I’d say that the upside—again, the upside risks to inflation and the downside risks to employment, have diminished. But they still exist. So there’s still some tension between the mandates. Are they fully in balance? Hard to say.” Fed Chair Powell,Press Conference Q&A 28 Jan 2026.
Governor Waller’s dissent highlighted the tension, as he argued that the labor market remains fundamentally weak, despite the ‘solid’ growth in economic activity. In his assessment, the labor market remains at significant risk of “substantial deterioration”.
US Inflation & Growth Update
Despite a firmer-than-expected PPI print for Dec, the broader inflation trend appears to remain contained. While headline PPI was unchanged at +3%, core PPI accelerated to +3.3% (expecting a slowdown to +2.9%). According to the updated Cleveland Fed PCE Nowcast, these PPI inputs suggest that core PCE likely increased by +2.84% over the year in Dec. This would remain largely consistent with the +2.8% core PCE print in Nov and sits slightly below Chair Powell’s expectation that Dec core PCE is likely to come in “around +3%”, also aligning with year-end Fed projections.
Meanwhile, the Atlanta Fed GDP nowcast for US GDP growth in Q4 slowed to +4.2% as the latest US trade data trimmed the large contribution from net exports. With the official advance Q4 GDP estimate to be released mid-Feb, the growth tracking remains elevated into year-end 2025.
Bank of Canada – Next Move “Difficult to Predict”
The Bank of Canada remained on hold for the second consecutive meeting, noting that current settings were still “at about the right level” to support the economy through its structural adjustment. In a notable shift, the Bank described the timing and direction of the next move as “difficult to predict”, opting instead to remain nimble and preserve optionality in the face of uncertainty over the structural adjustment underway. While updated forecasts had not changed significantly from the Oct meeting, the upcoming review of the USMCA (trade agreement) was noted as a key risk in the outlook.
Outlook for the week ahead: US Labor Market, Central Bank Meetings: RBA, BoE, and ECB, S&P Global PMIs Jan
With markets continuing to digest the implications of the new Fed Chair nomination, the upcoming week brings a heavy slate of consequential data and central bank policy decisions.
Key factors & events to watch this week:
US Labor Market (Jan) and Annual Benchmarking
The labor market remains a primary focus following the FOMC’s shift characterizing labor market conditions as “stabilizing”. Any deviation from this stabilizing trend could see a re-evaluation of the current ‘on hold’ stance before the Jun meeting.
- Non-farm payroll growth is expected to rebound to +67k in Jan, from +50k in Dec.
- The unemployment rate is expected to be unchanged at a low 4.4%.
- The annual benchmarking process and updated seasonal adjustment factors are likely to complicate the view of the labor market and are expected to show a downward revision to payroll growth.
- JOLTS: Job openings are expected to increase slightly to 7.2m at the end of Dec (from 7.1m at the end of Nov)
- The Challenger Job Cut Announcement survey will remain in focus after the slowing trend in late 2025.
- Initial jobless claims are expected to remain low around 213k for the week ending 31 Jan. Continuing claims have continued to fall.
US Growth and Fed speeches
- ISM PMIs (Jan): Manufacturing activity is expected to remain near a stalled pace (expecting 48.5) while services activity is expected to continue expanding at a moderate pace (expecting 53.8).
- Fed speeches: Vice Chair Jefferson and Governor Cook will both give speeches this week on the Economic Outlook, likely outlining their views on the economy post the FOMC decision last week.
Central Bank Decisions
- RBA: Widely expected to hike. The stronger-than-expected inflation results for Q4, together with firmer economic data, have markets pricing in a potential increase of the cash rate to 3.85% at its meeting this week. Focus will be on updated forecasts and guidance for the future rate path (markets are currently pricing approx. 60bps of hikes through June 2027, source: ASX).
- The BoE is expected to stay on hold after a slim majority to cut at its Dec meeting. The Bank has shifted toward a more balanced assessment of inflation and growth risks, viewing future cuts as a ‘closer call’, and conditional on the inflation outlook.
- The ECB is also expected to remain on hold this week. At its last meeting, the ECB stayed on hold, with policy settings at a ‘roughly neutral level’. Given the uncertain international environment, the ECB guidance is likely to keep all options on the table.
Euro Area CPI – prelim Jan
- The latest prelim Euro area CPI for Jan will be released before the ECB decision. Headline CPI is expected to slow to +1.8% in Jan (from +1.9% in Dec), and core CPI is also expected to slow to +2.2% in Jan (from +2.3% in Dec).
The full suite of S&P Global PMIs for Jan will be released this week, providing the first view of private sector momentum at the start of 2026.
The Japanese parliametary elections will be held over the weekend on 8 Feb.
This week, the US Treasury will auction and settle approx. $751bn in ST Bills, Notes, FRNs, and Bonds, raising approx. $64bn in new money. Approx $28.5bn in ST Bills, Notes, and Bonds will mature on the Fed balance sheet and will be reinvested.
Finally, the latest quarterly refunding announcement will be made by the US Treasury this week.
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 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
