The market is already pricing in a hold when the US Federal Reserve’s Federal Open Market Committee (FOMC) meets on January 29, and the probability of a March 19, interest 2025 rate cut dropped to around 25%, from 41% the previous day, following the latest US jobs report. As of writing, the likelihood of a rate cut only increases rises above 50% in June or July and even then, the market lacked the conviction that it previously had.<\/p>\n\n\n\n
Good news for the economy, not for the markets<\/strong><\/p>\n\n\n\n The Bureau of Labor Statistics reported that the US economy added 256,000 jobs in December, higher than the downward-revised 212,000 jobs added in November and much higher than the 155,000-164,000 range expected by analysts. <\/p>\n\n\n\n The unemployment rate likewise fell to 4.1%, rather than maintaining at 4.2% as expected. Wage growth was up 0.3% MoM and 3.9% YoY, a slight slowdown from last month’s 0.4% MoM \/ 4.0% YoY but still faster than the 0.3% MoM \/ 2.9% YoY forecast for December inflation which is set to come out later this week. <\/p>\n\n\n\n All these factors have reignited sticky inflation fears and point to a more extended pause from the Federal Open Market Committee (FOMC).<\/p>\n\n\n\n Stock market’s reaction<\/strong><\/p>\n\n\n\n The Dow Jones index slumped by nearly 700 pts and yields on 10-Year US Treasury notes jumped 9bps to 4.77%, its highest since November 2023. The DXY index, a measure of the US Dollar against a basket of major currencies, jumped above 109 following the report. This is the highest level it has seen since November 2022.<\/p>\n\n\n\n The dollar\u2019s strength could lead to further pressure on the peso and could influence
our own Bangko Sentral to stand pat on benchmark rates when they meet in February.<\/p>\n\n\n\n