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.

By Andrea Shalal

WASHINGTON (Reuters) – U.S. Treasury Secretary Janet Yellen on Wednesday will defend the Biden administration’s response to the COVID pandemic, arguing that its stimulus spending and other policies led to robust growth and averted millions of job losses.

In her last major speech before leaving office on Tuesday, Yellen will argue that the Biden administration’s stimulus checks, monthly child tax credits and enhanced unemployment benefits reduced major downside risks, and that inflation – which spiked everywhere – fell earlier in the U.S. than in other rich countries.

While the U.S. economy had done “remarkably well” in the aftermath of the pandemic, it outperformed other advanced economies and did better than in past recessions, Yellen said in excerpts released by the Treasury Department. The pace of inflation cooled dramatically as supply disruptions eased.

The Biden administration and Democrats in Congress enacted the $1.9 trillion American Rescue Plan Act in March 2021, after more than $3 trillion in COVID spending approved during President-elect Donald Trump’s first administration in 2020.

The actions kept paychecks flowing for idled workers, paid rent and put thousands of dollars directly into Americans’ bank accounts, fueling sharp increases in consumer spending at a time when the economy was plagued by pandemic-driven shortages.

Yellen, who last week offered a rare concession that the stimulus spending may have contributed “a little bit” to inflation, argued on Wednesday that it substantially offset the income gaps faced by some 10 million people who lost their jobs or left the labor force by the end of 2020.

The spending averted “significant hardship” and supported demand, which allowed Americans to get back to work quickly, which in turn helped the U.S. avoid the erosion of skills and fallout of long-term unemployment, she said.

A policy aimed solely at preventing the post-pandemic surge in prices without looking at employment consequences would have resulted in far less or even contractionary spending, Yellen said.

Lower spending would likely have led to far lower output and employment, with potentially millions more people out of work, households without the income to meet their financial obligations, and lackluster consumer spending, she said.

Yellen said most researchers agreed a substantial increase in the unemployment rate would have been needed to keep inflation at the Federal Reserve’s 2% target, possibly as high as 10% to 14% throughout 2021 and 2022, with an additional 9 million to 15 million people out of work.

The U.S. unemployment rate has been below 4% for more than two years, an unparalleled streak not seen since the 1960s. The unemployment rate since 1948 has averaged 5.7%.

Yellen said the U.S. economy was doing well now, with solid growth, low inflation and a strong labor market, but more work was needed to address structural trends that make it difficult for many families to achieve a middle-class life.

The former Federal Reserve chair has championed what she calls “modern supply-side economics,” which rejects the idea that deregulation and tax cuts for the rich will fuel broader economic growth, and focuses instead on investments in infrastructure, the labor force and research and development.

By Andy Bruce

LEEDS, England (Reuters) -The Bank of England should move quickly to bring down interest rates given signs of a slowdown in Britain’s economy, Alan Taylor, the BoE’s most recently appointed interest rate setter, said on Wednesday.

Taylor, an economics professor, voted to cut rates in November – when Bank Rate was cut to its current level of 4.75% – and again in December when the Monetary Policy Committee majority left it unchanged.

“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,” Taylor said in the text of a speech he was due deliver at Leeds University.

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

The BoE has reduced its benchmark Bank Rate twice since August – less than other central banks – and it has stressed it is likely to move gradually on further interest rate cuts, given persistent inflation pressures in Britain’s economy.

Taylor said he thought the risks around inflation had shifted in the last 12 months, by slowing more quickly than expected over 2024.

Sterling fell against the dollar around the time Taylor’s speech text was published, losing about a third of a cent.

Data published earlier on Wednesday showed Britain’s headline rate of inflation slowed to 2.5% in December, down from 2.6% in November, and underlying measures of price growth watched closely by the BoE cooled more quickly.

Taylor said that while the risks posed by inflation appeared to be fading, the possibility of a downside scenario for Britain’s economy had increased and, even if it was not his base case, it was appropriate to cut rates in response.

“Right now, I think it makes sense to cut rates pre-emptively to take out a little insurance against this change in the balance of risks, given that our policy rate is still far above neutral and would still remain very restrictive,” he said.

By Michael S. Derby

HARTFORD, Connecticut (Reuters) – Federal Reserve Bank of New York President John Williams said Wednesday that future monetary policy actions will be driven by economic data as the central bank confronts a high level of uncertainty in large part driven by potential government policy changes.

“Monetary policy is well positioned to keep the risks to our goals in balance” and “the path for monetary policy will depend on the data,” Williams said in the text of a speech prepared for delivery before the CBIA Economic Summit and Outlook 2025 in Hartford, Connecticut.

Williams, who also serves as vice-chairman of the interest-rate setting Federal Open Market Committee, pointed to the government as a key source of what limits him in providing guidance about the outlook for monetary policy.

“The economic outlook remains highly uncertain, especially around potential fiscal, trade, immigration, and regulatory policies,” Williams said, “therefore, our decisions on future monetary policy actions will continue to be based on the totality of the data, the evolution of the economic outlook, and the risks to achieving our dual mandate goals.”

At the Fed’s most recent policy meeting held last month central bankers lowered their federal funds target rate range by a quarter percentage point to between 4.25% and 4.5%. As part of updated forecasts they also trimmed estimates of rate cuts for the current year and pushed up forecasts of inflation in the wake of recent data that had been showing sticky price pressures.

The return of Donald Trump as president has cast a cloud over the outlook, with the president-elect having campaigned on trade and immigration policies economists generally believe will push inflation higher and complicate the Fed’s work of getting inflation back down to 2%.

In his remarks, Williams said the economy was in good shape and had returned to balance after the disturbances of the pandemic years. He said the process of disinflation is likely to continue but added it could take a while, noting he sees a return to the 2% target “in the coming years.”

Williams also said that he expects growth in the nation’s gross domestic product to moderate to 2% as the unemployment rate holds around 4% to 4.25%.

Williams also said the Fed’s balance sheet drawdown has been proceeding smoothly.

By Hari Kishan and Shaloo Shrivastava

BENGALURU (Reuters) – The Bank of England will cut interest rates four times this year to support a flat-lining economy, economists polled by Reuters said, but they added that risks to inflation are to the upside, suggesting policymakers may end up doing less.

Interest rate futures are pricing in only two reductions this year, and recent ructions in global bond markets underscore rising inflation concerns linked to U.S. President-elect Donald Trump’s protectionist economic agenda.

British inflation slowed unexpectedly last month and core measures of price growth – tracked by the BoE – fell more sharply, suggesting scope for more cuts even though the Federal Reserve may only have one cut left to go.

While interest rates futures are pricing in just two 25 bps rate cuts from the BOE for the year, a 60% majority of economists polled Jan. 10-15, 38 of 63, expect four quarter-point cuts, taking Bank Rate to 3.75%. That outlook was unchanged from last month.

All 65 economists in the current survey expect the central bank to trim Bank Rate by a quarter percentage point on Feb. 6.

Despite that unanimity on the near-term outlook, some economists do not hold much confidence in how many rate cuts the BoE will be able to deliver, echoing recent cautious language from policymakers themselves.

“With underlying inflation already high, and a range of survey based inflation expectations moving higher, the BoE is likely to be more hesitant,” noted economists at JP Morgan.

“We expect the BoE will still cut in February, but the Bank will find it harder to send a confident message about future easing if inflation expectations continue to rise.”

All but two of 25 economists who answered an additional question said it was more likely UK inflation this year will come in higher than their forecasts rather than lower. Inflation as measured by the consumer price index (CPI) was forecast to average 2.5% this year and 2.1% next. 

Complicating matters has been a punishing sell-off in the pound in recent days and in UK government debt, along with U.S. Treasuries, which has pushed the yield on the benchmark 10-year gilt to its highest since 2008.

“The increase in yields is mainly a global story,” noted Michael Saunders, senior advisor at Oxford Economics and former BoE Monetary Policy Committee member.

“However, if domestic fiscal concerns introduce a risk premium on UK assets, then the MPC might need to keep Bank Rate higher in order to dampen the inflationary impact of a weaker pound. But we see this as a risk, rather than being our baseline assumption,” Saunders wrote.

The UK economy barely grew in the second half of last year. It was forecast to grow just 0.9% in 2024, and by an average of 1.3% this year and 1.5% next year.

(Other stories from the Reuters global economic poll)

(Reuters) – Michigan Governor Gretchen Whitmer on Wednesday warned that potential 25% tariffs on imports from Mexico and Canada suggested by President-elect Donald Trump could harm the U.S. auto sector, boost vehicle prices and benefit China.

The Democratic governor said in a speech in Detroit imposing tariffs would damage supply chains and slow production lines and would cut “jobs on both sides of the border. Think about this: 70% of all the auto parts we make in Michigan go directly to our neighbors…. The only winner in this equation is China. They would love nothing more than to watch us cripple America’s auto ecosystem all by ourselves. This is a matter of national security.”

By Fergal Smith

TORONTO (Reuters) – Canadian home sales took a breather in December but were still 10% higher in the fourth quarter compared to the third quarter as the Bank of Canada cut borrowing costs, data from the Canadian Real Estate Association (CREA) showed on Wednesday.

The fourth quarter increase stood among the stronger quarters for activity in the last 20 years outside of the pandemic, CREA said.

“The number of homes sold across Canada declined in December compared to a stronger October and November, although that was likely more of a supply story than a demand story,” Shaun Cathcart, CREA’s senior economist, said in a statement.

“Our forecast continues to be for a significant unleashing of demand in the spring of 2025, with the expected bottom for interest rates coinciding with sellers listing properties for sale in big numbers once the snow melts.”

The Bank of Canada has cut interest rates by 1.75 percentage points since June to 3.25% to support the economy.

Sales fell by 5.8% in December from November but were up 19.2% on an annual basis.

The industry group’s home price index edged up 0.3% on the month and was down 0.2% annually.

Investing.com — The latest U.S. Consumer Price Index (CPI) report has sparked a range of reactions from Wall Street analysts, with key implications for Federal Reserve policy and market expectations.

ING maintained its forecast of three rate cuts in 2025 but adjusted its timing, suggesting cuts may begin in June rather than March. 

“Focus on the blue bars, which are the MoM. We need to see them averaging 0.17% MoM (the black line) in order to be confident the annual rate of core inflation is on the path to the 2% target,” said the firm, noting that current inflation levels are “still running too hot for comfort.”

Morgan Stanley (NYSE:MS) interprets the softer-than-expected CPI figures as further evidence of disinflation, particularly within core services excluding housing. 

The bank expects a March rate cut, emphasizing the print’s support for the narrative that recent inflation acceleration was temporary. “ Weaker inflation should give the Fed more confidence that recent acceleration was just a bump,” said the bank.

Morgan Stanley foresees sequential inflation acceleration in January due to seasonality but anticipates a meaningful year-over-year decline.

Wolfe Research describes the CPI data as slightly softer than expected, projecting a modest 0.19% increase in December core PCE inflation, with a year-over-year rate of 2.8%. Wolfe expects two rate cuts in 2025, likely in May and September, suggesting the print helps counter overblown Fed hiking expectations.

Wells Fargo (NYSE:WFC) notes that while headline inflation was hot in December due to food and energy prices, the core CPI showed improvement. However, the bank remains cautious, pointing out that the inflation trend is still stubbornly above the Fed’s target. As a result, Wells Fargo now anticipates only two rate cuts in September and December, down from the previously expected three.

ANNAPOLIS, Maryland (Reuters) – U.S. inflation data for December indicates price pressures are continuing to ease, Richmond Federal Reserve President Thomas Barkin said on Wednesday after a government report showed that an important underlying measure of price increases had slowed last month.

The Consumer Price Index report for December “continues the story we have been on, which is that inflation is coming down towards target,” Barkin told reporters at a Maryland Chamber of Commerce event.