Introduces Abigail Watts of UBS to discuss CPI expectations and asks why distortions unwinding might give upside, and whether more upside is expected.
Vonnie Quinn
Abigail Watts
Confirms CPI distortions from November sampling and bi-monthly city data will create catch-up in December, expecting 44bp rise (2.9% annual), with 13bp from distortions. Upside risks continue into January and April.
Asks if strong CPI would stop Fed from considering cuts in January, given weak labor market data.
Vonnie Quinn
Abigail Watts
Labor market report was weak, but UBS pushed cut expectations from Q1 to Q3 (July) due to sticky inflation. Notes unemployment rate still elevated vs 2025, U6 up nearly 1pp, nonfarm payrolls weak excluding healthcare.
Asks if no cuts expected for six months (complete pause until Q3).
Vonnie Quinn
Abigail Watts
Next cut projected for July; risk it could be pulled forward to March/June depending on inflation data. Today's report important to gauge bias vs underlying trend.
Asks what's most important to watch for job creation and inflation: immigration, affordability push, or fiscal bill.
Vonnie Quinn
Abigail Watts
Fiscal policy is key story for 2026 optimism. Tax season and potential big refunds could boost consumption and job creation in Q2.
Asks about concern over Fed independence given 11 central banks' solidarity statement.
Vonnie Quinn
Abigail Watts
Fed independence risks likely to amplify in 2026; watching inflation expectations for unanchoring. Base case Powell stays until May, then new chair nominated.