By Ann Saphir

(Reuters) -The U.S. economy ended 2024 with a slight to moderate increase in activity and a tick upward in employment, the Federal Reserve said on Wednesday, but businesses flagged a range of concerns about the potential for policies under President-elect Donald Trump to push prices higher.

The findings, which draw on observations from the business and community contacts of each of the Fed’s 12 regional banks through Jan. 6, provide a snapshot of the economy before Trump returns to the White House next week.

“More contacts were optimistic about the outlook for 2025 than were pessimistic about it, though contacts in several Districts expressed concerns that changes in immigration and tariff policy could negatively affect the economy,” the U.S. central bank said in its summary of surveys and interviews from across the country known collectively as the Beige Book.

“Contacts expected prices to continue to rise in 2025, with some noting the potential for higher tariffs to contribute to price increases.”

Concerns were evident even in regions where Trump performed strongly in his Nov. 5 election victory over Democrat Kamala Harris on a platform of hefty tariff increases and stiff restrictions on immigration.

“Outlooks continued to improve although there was concern regarding potentially adverse effects of future immigration and trade policies,” the Dallas Fed said.

“Food manufacturing and agricultural contacts in Kansas and Nebraska indicated restrictions on temporary migrant labor could lead to significant supply constraints,” the Kansas City Fed reported. “Similarly, leisure and hospitality contacts in Colorado suggested immigration restrictions could exacerbate labor shortages in towns near resort communities. Technology industry contacts expressed additional concerns surrounding the ability to employ overseas technology workers if offshoring policies were to shift.”

Manufacturers in the Richmond Fed’s district were already factoring tariffs into higher inflation expectations, the survey showed. “Firms’ expectations for price growth a year from now increased,” the bank said. “Manufacturers expected prices to rise at a faster rate a year from now compared to nonmanufacturers, with several citing tariffs on inputs as a reason for higher expected price growth in the future.”

The survey data was collected before the start of the California wildfires.

Fed policymakers cut the policy rate by a full percentage point in the final four months of last year to a current range of 4.25%-4.50%. Most project a smaller reduction this year, given slowing progress toward the Fed’s 2% inflation goal in recent months and a strong labor market.

Consumer prices rose 2.9% in the 12 months through December, data published on Wednesday showed, the largest rise since July and an acceleration from November’s 2.7% increase. December’s unemployment rate was 4.1%, lower than the prior month.

Going forward, uncertainty around how Trump’s planned tariffs, tax cuts and other policies will affect the economy also has Fed policymakers in wait-and-see mode.

Financial markets are betting on no policy rate reduction until June at the earliest.

By Suzanne McGee and Saqib Iqbal Ahmed

(Reuters) – A relatively benign U.S. reading on consumer price increases triggered a sharp relief rally in stocks and bonds on Wednesday, but traders and investors warn that markets are likely to remain anxious about the pace of inflation.

The path ahead remains shadowed by ongoing uncertainty about the outlook for further Federal Reserve interest rate cuts and incoming president Donald Trump’s actions on issues like taxes and tariffs, market participants said.

“The issues that have been driving rates higher and weighing on stocks are still out there,” said Art Hogan, market strategist at B. Riley Wealth. “We just don’t know whether we’ll see tariffs that are surgical or sweeping, what kind of policy moves we’ll see in other areas that could feed into inflation or growth.”

While the consumer price index for December rose at a faster-than-expected pace, markets seized on the core CPI, which excludes the volatile food and energy components. Core CPI increased 0.2% in December after rising 0.3% for four straight months.

Stocks surged following the CPI report with the benchmark S&P 500 jumping 1.8%.

The benchmark 10-year Treasury reversed losses incurred in the wake of last Friday’s strong job creation report, pushing yields back down to 4.66%. Yields fall when bond prices rise.

“This reading beat expectations modestly, but traders pounce aggressively on any whiff of good news,” said Steve Sosnick, market strategist at Interactive Brokers (NASDAQ:IBKR). “It’s a number and a reaction that we have to view positively, although quite possibly it’s magnified by the negativity we’ve been battling.”

Yields had climbed sharply in recent weeks after the Fed in December tempered its outlook for rate cuts and projected firmer inflation in 2025 than it had previously.

Before the CPI report, “there was some whispering that we might actually see a rate hike,” said Jeff Weniger, head of equity strategy at WisdomTree Inc., a New York asset management firm.

But fears about the potential fallout that Trump’s policies could have on inflation remain a concern. Fed officials on Wednesday noted heightened uncertainty in the coming months as they await a first glimpse of the incoming administration’s policies, even as they said Wednesday’s data showed inflation was continuing to ease.

Following the CPI report, Rick Rieder, BlackRock’s chief investment officer of global fixed income, said progress on inflation “may be slow and uneven, not least due to the great uncertainties that face the economy with fiscal policy changes coming over the next year.”

For example, Rieder said in emailed comments, changes to the tariffs and trade regime “do hold the potential to increase core goods inflation for a time.”

As the market remains data dependent, volatility could become more common. Kevin Flanagan, head of fixed income strategy at WisdomTree, expects that moves of 10 to 15 basis points daily for the 10-year Treasury could become the new norm.

Following the data, traders of interest-rate futures still projected the Fed waiting until June to deliver its next rate cut. But now they are pricing about even odds the central bank will follow with a second rate cut by year’s end. Before the report, markets reflected bets on only a single cut in 2025.

Tina Adatia, head of fixed income client portfolio management for Goldman Sachs Asset Management, said in a note to clients that the CPI data strengthens arguments for further cuts but “the Fed has scope to be patient.”

“More good inflation data will be required for the Fed to deliver further easing,” Adatia said.

Investing.com — The surprise dip in core inflation in December eased some jitters about a long Federal Reserve pause, but Macquarie is still sticking with its call for one rate cut, warning that disinflation has limited room to continue. 

“Core CPI, however, was softer at +0.23% MoM, the lowest reading since July,” Macquarie analysts noted in a report released Wednesday. This softer core reading provides some relief after recent data had suggested risks of a more elevated figure.

While headline CPI was firm rising 0.4% month-over-month, boosted by strong food and energy prices, the core measure, which excludes these volatile components, showed a more favorable trend. Year-over-year core CPI inflation remained steady at 2.9%.

Despite the positive print for December inflation, Macquarie maintains a cautious outlook, warning that the trend of disinflation hasn’t much room to continue following a rebound in shelter costs and the impact of potential higher tariffs from the incoming Donald Trump administration.  

Shelter costs showed some moderation, with both owners’ equivalent rent and rent of primary residence rebounding to +0.31% month-over-month, Macquarie said, suggesting that this trend may be nearing its end. “Despite this, this disinflation trend is likely now in its later innings. Both OER and rent of primary residence are near pre-pandemic levels MoM,” the analysts added.

The upside risks to inflation, particularly in core goods, which are vulnerable to potential higher tariffs from President-elect Donald Trump, is likely to keep the Fed in a cautious stance on rate cuts. 

By Jonathan Stempel

NEW YORK (Reuters) – Drake sued his longtime label on Wednesday, accusing Universal Music Group (AS:UMG) of defamation for promoting Kendrick Lamar’s “Not Like Us,” saying the song’s false accusation that the Canadian rapper is a pedophile has put him and his family in danger.

In a complaint in Manhattan federal court, Drake said the song was “intended to convey the specific, unmistakable, and false factual allegation that Drake is a criminal pedophile” and the public should exert “vigilante justice” in response.

Drake said it led to attempted break-ins at his home, prompting him to travel with extra security, and pull his seven-year-old son from his Toronto elementary school and the Toronto area.

He and Lamar, an American rapper who won the 2018 Pulitzer Prize for music, have feuded for about a decade.

“UMG may spin this complaint as a rap beef gone legal, but this lawsuit is not about a war of words between artists,” according to the complaint from Drake, whose given name is Aubrey Drake Graham.

“Notwithstanding a relationship spanning more than a decade, UMG intentionally sought to turn Drake into a pariah, a target for harassment, or worse,” the complaint added. “UMG chose corporate greed over the safety and well-being of its artists.”

Neither UMG nor its lawyers immediately responded to requests for comment. UMG has denied trying to undermine Drake or using unethical practices to promote “Not Like Us.”

The lawsuit seeks unspecified compensatory and punitive damages for defamation and harassment. Lamar is not a defendant, though Drake called “Not Like Us” defamatory. Drake’s lawyers did not immediately respond to requests for additional comment.

Wednesday’s lawsuit followed a November petition in a New York state court in which Drake, through his company Frozen Moments, accused UMG and Spotify (NYSE:SPOT) of using payola and streaming bots to promote “Not Like Us” at his music’s expense.

Drake withdrew that petition on Tuesday night. His related case against UMG and radio company iHeartMedia (NASDAQ:IHRT) remains pending in a Texas state court, online records show.

The feud between Drake and Lamar has played out in part through so-called “diss” tracks including “Not Like Us.”

In that song, released last May 4, Lamar mentioned Drake by name, saying “Drake, I hear you like ’em young” and calling him and others “certified pedophiles.”

A day earlier, Drake released “Family Matters,” appearing to accuse Lamar of physical abuse and infidelity, and questioning whether Lamar’s business partner fathered one of his children.

“Not Like Us” topped Billboard’s Hot 100 for two weeks last year. It received five nominations for the Feb. 2 Grammy Awards, including record of the year and song of the year.

The case is Graham v UMG Recordings Inc, U.S. District Court, Southern District of New York, No. 25-00399.

By Carolina Mandl

NEW YORK (Reuters) – Global hedge funds added more bets against U.S. stocks over the last week through Jan 9, ahead of a blowout U.S. jobs report that sparked a sell-off on Wall Street, Morgan Stanley (NYSE:MS) and Goldman Sachs said in notes on Friday.

The U.S. Labor Department’s closely watched employment report on Friday showed job growth accelerated to 256,000 jobs in December, the most since March, while the unemployment fell to 4.1%.

The hotter-than-expected jobs data sent stocks spiralling, sending the S&P 500 down 1.54% on Friday and erasing all its 2025 gains.

Morgan Stanley said portfolio managers increased shorts – or bets stocks will fall – in sectors such as staples, software, financials and healthcare in the days ahead of the jobs report, while they sold long positions in communication services.

Still, the bank said hedge funds bought European and Asian stocks over the same period.

Goldman Sachs also said short positions outpaced long additions to portfolios, but it saw this trend in all regions, led by North America and Europe.

“We’ve seen a rotation where managers have been taking profits, selling their longs, and then adding to shorts,” said Jon Caplis, CEO of hedge fund research firm PivotalPath. He said the move is also related to the Federal Reserve’s more hawkish take on interest rate cuts and big data releases, such as the consumer price index on Wednesday.

One exception was the technology, media and telecommunications sector (TMT), Goldman Sachs said, as hedge funds added it at the fastest pace in three months.

Stocks in the technology sector were among the hardest hit on Friday, down 2.23%, behind financials and real estate. Big tech companies start to report earnings after Martin Luther King Jr. Day on Jan 20.

As two of the biggest global prime brokers, Goldman Sachs and Morgan Stanley track the portfolios of their hedge fund clients to indicate positioning and flow trends.

(Reuters) – U.S. central bankers project more limited interest-rate cuts in 2025 than the full percentage point of reductions they delivered in 2024, given slower progress toward their 2% inflation goal, a still-strong labor market, and a lot of uncertainty over the potential impact of tax cuts, tariffs and other economic policies in Donald Trump’s second term as president.

Here is a look at comments from Fed policymakers since the last rate-setting decision, sorting them under the labels “dove” and “hawk” as a rough shorthand for their monetary policy leanings, as best as can be figured. A dove is more focused on risks to the labor market and may want to cut rates more quickly, while a hawk is more focused on the threat of inflation and may be more cautious about rate cuts.

The designations are based on comments and published remarks; for more, click on the photos in this graphic. For a breakdown of how Reuters’ counts in each category have changed, please scroll to the bottom of this story.  

Dove Dovish Centrist Hawkish Hawk

  Lisa Cook, Jerome Powell, Michelle Bowman,  

Governor, Fed Chair, Governor,

permanent voter: permanent permanent voter:

“I think we can voter: “I think “We should be

afford to proceed we’re in a good cautious in

more cautiously place, but I considering

with further think from here changes to the

cuts.” Jan. 6, it’s a new phase policy rate as we

2025 and we’re going move toward a

to be cautious more neutral

about further setting…We

cuts.” Dec. 18, should also

2024 refrain from

  prejudging the

incoming

administration’s

future policies.”

Jan. 9, 2025

  Austan Goolsbee, John Williams, Jeffrey Schmid,  

Chicago Fed New York Fed Kansas City Fed

President, 2025 President, President, 2025

voter: “Is there permanent voter: “I am in

evidence of voter: “While I favor of

overheating of expect that adjusting policy

the economy? So disinflation gradually going

far, in recent will progress, forward and only

months, there is it will take in response to a

not a lot of time, and the sustained change

evidence.” Jan. process may well in the tone of

10, 2025 be the data.” Jan.

9, 2025

choppy. Monetary  

policy is well

positioned to

keep the risks

to our goals in

balance.” Jan.

15, 2025

    Philip Alberto Musalem,  

Jefferson, Vice St. Louis Fed

Chair, permanent President, 2025

voter: No public voter: Since

comments on September, “the

monetary policy economic data

since Oct. 2024. came in

  stronger…and the

inflation numbers

printed higher

than desired. So

I changed my

assessment of

risks.” Jan. 10,

2025

    Michael Barr, Beth Hammack,  

Vice Chair of Cleveland Fed

Supervision, President, 2026

permanent voter: voter: No public

No public comments on

comments on monetary policy

monetary policy since Dec. 2024.

since May 2024.

    Christopher Lorie Logan,  

Waller, Dallas Fed

Governor, President, 2026

permanent voter: voter: No public

“I believe that comments on

inflation will monetary policy

continue to make since Nov. 2024.

progress toward

our 2% goal over

the medium term

and that further

reductions will

be appropriate.”

Jan. 8, 2025

    Adriana Kugler, Neel Kashkari,  

Governor, Minneapolis Fed

permanent voter: President, 2026

“We are fully voter: No public

aware that we comments on

are not there monetary policy

yet – no one is since Nov. 2024.

popping

champagne

anywhere….And at

the same time

… we want the

unemployment

rate to stay

where it is.”

Jan. 4, 2025

    Susan Collins, Thomas Barkin,  

Boston Fed Richmond Fed

President, 2025 President, 2027

voter: “With an voter: The

economy that is December consumer

in a good place price index data

overall and “continues the

policy already story we have

closer to a more been on, which is

neutral stance, that inflation is

I view the coming down

current nature towards target.”

of uncertainty Jan. 15, 2025

as calling for a

gradual and

patient approach

to

policymaking.”

Jan. 9, 2025

    Patrick Harker,    

Philadelphia Fed

President, 2026

voter: “It’s

appropriate for

us to take a bit

of a pause right

now and see how

things shake

out.” Jan. 9,

2025

    Raphael Bostic,    

Atlanta Fed

President, 2027

voter: No public

comments on

monetary policy

since Dec. 2024.

    Mary Daly, San    

Francisco Fed

President, 2027

voter: “At this

point, I would

not want to see

further slowing

in the labor

market.” Jan. 4,

2025

Notes: Fed policymakers reduced the policy rate in December to the 4.25%-4.50% range. Projections showed most policymakers expect to cut rates by a half percentage point to the 3.75%-4.00% range by the end of this year, a smaller reduction than they saw in September.

The seven Fed governors, including the Fed chief and vice chairs, have permanent votes at the Federal Open Market Committee meetings, which are held eight times a year. All 12 regional Fed presidents discuss and debate monetary policy at the meetings, but only five cast votes, including the New York Fed president and four others who vote for one year at a time on a rotating schedule. 

Reuters over time has shifted policymaker designations based on fresh comments and developing circumstances. Below is a Reuters count of policymakers in each category, heading into recent Fed meetings. 

FOMC Date Dove Dovish Centrist Hawkish Hawk

Dec. ’24 0 2 10 7 0

Nov. ’24 0 0 13 5 0

Sept ’24 0 1 12 5 0

May through July ’24 0 1 10 6 1

March ’24 0 1 11 5 1

Jan ’24 0 2 9 4 1

Dec ’23 0 2 9 4 1

Oct/Nov ’23 0 2 7 5 2

Sept ’23 0 4 3 6 3

June ’23 0 3 3 8 3

March ’23 0 2 3 10 2

Dec ’22 0 4 1 12 2

Investing.com — The potential for higher tariffs from the incoming Donald Trump administration has stoked concerns about economy and inflation at time when price pressures are expected to persists this year, according to the Federal Reserve’s Biege Book released Wednesday.

“Contacts expected prices to continue to rise in 2025, with some noting the potential for higher tariffs to contribute to price increases,” according to anecdotal information collected by the Fed’s 12 reserve banks through Jan. 6.

Contacts in several Districts, meanwhile, expressed concerns that changes “in immigration and tariff policy could negatively affect the economy.,” the report showed.

The report comes just days ahead of President-elect Donald Trump’s inauguration on Jan. 20, with many expecting Trump to imposed tariffs sooner rather later.

The outlook on the economy, however, remains more optimistic than pessimistic, despite growing signs of uncertainty on labor demand.  “Contacts in some Districts expressed greater uncertainty about their future staffing needs,” it added.

Investing.com — Alan Taylor, the most recent appointee to the Bank of England’s (BoE) interest rate-setting body, has called for a swift reduction in interest rates in response to indications of an economic slowdown in Britain, according to Reuters, citing a text of speech he was due deliver at Leeds University.

“We are in the last half mile on inflation, but with the economy weakening, it’s time to get interest rates back toward normal to sustain a soft landing,” according to Taylor.

“It is this logic that convinced me to vote for an interest rate cut in December.”

Over the past year, Taylor noted that the risks associated with inflation have shifted, slowing more rapidly than anticipated over 2024.

While the threats posed by inflation seem to be diminishing, Taylor pointed out the increased likelihood of a downside scenario for Britain’s economy.

In his view, even if this is not the base case, it would be appropriate to respond by lowering interest rates.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Macquarie strategists assessed the latest round of US sanctions, emphasizing their severity compared to previous measures.

The sanctions, which target individuals, corporate entities, and assets, including unregistered vessels transporting hydrocarbons, are considered comprehensive and far-reaching in both depth and scope.

The enforcement of these sanctions is highlighted as a priority, with the US government expressing a clear intent to ensure compliance.

Macquarie points out that the penalties for non-compliance are significant, potentially threatening the operational viability of entities that attempt to circumvent the new restrictions.

According to Macquarie, the recent sanctions imposed by the United States, in response to actions in Russia post Ukraine invasion and Iran, were not as stringent when evaluated against three key parameters.

These parameters include the depth and scope of the sanctions, the intended enforcement, and the penalties for non-compliance.

In contrast, the sanctions announced on January 10th demonstrate a marked increase in seriousness across all three factors.

Macquarie notes that the list of affected parties is extensive, and the inclusion of previously unknown vessels indicates a detailed and expansive approach to identifying and penalizing those involved in prohibited activities.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Macquarie has reaffirmed its expectation that the Federal Open Market Committee (FOMC) will implement a single 25 basis points rate cut following the latest U.S. consumer price index (CPI) data.

The headline CPI in December remained robust, increasing by 0.4% month-over-month, influenced by strong food and energy prices, continuing an accelerating trend that has been observed since mid-2024.

In contrast, the core CPI, which excludes volatile food and energy prices, showed a softer increase of 0.23% month-over-month, marking the lowest reading since July.

This was considered a positive development by Macquarie, especially since core PPI subcomponents released earlier in the week had indicated a potential for a higher inflation reading. The year-over-year core CPI inflation rate held steady at 2.9%.

Macquarie analysts anticipate that the core Personal Consumption Expenditures (PCE) price index, a preferred inflation measure by the Federal Reserve, will likely mirror the core CPI’s recent performance.

They also expect core CPI inflation to moderate in the first quarter of the year, aided by favorable base effects and monthly core readings similar to those of December. However, they caution that threatened tariffs could pose an upside risk to inflation beyond the current forecast horizon.

The investment bank maintains that the FOMC is likely to reduce interest rates by 25 basis points only once more, predicting that the most probable timing for this action would be in March or May.

Macquarie also notes that the risks are tilted towards a later date for the rate cut.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.