U.S. Reflation Risk Complicates Fed Policy Decisions For 2025

2025-01-08 10:00:00 ET

Summary

• Year-over-year growth in US broad money supply continued to accelerate through November.
• The rebound in money supply growth comes at a tricky moment for the Federal Reserve, which is attempting to navigate between two conflicting trends: slowing economic growth and sticky, if not rising, inflation.
• Fed funds futures appear to be pricing in high odds that the central bank will leave its target rate unchanged at a 4.25-4.50% range at the next policy meeting on Jan. 29.

By James Picerno

Year-over-year growth in US broad money supply continued to accelerate through November. The 3.7% annual pace marks the fastest pace in nearly 2-1/2 years. Although the upside trend is still below the pre-pandemic growth rate, momentum appears set to push the annual change higher still in the near term. The rebound in money supply growth comes at a tricky moment for the Federal Reserve, which is attempting to navigate between two conflicting trends: slowing economic growth and sticky, if not rising, inflation....

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