Market Movements - December 01, 2025

[Andrew Postell]

Inflation Holding Steady

Inflation is expected to hover around the 3% mark through year-end, barring any major shocks. Core CPI (excluding food and energy) is also near 3%, signaling consistent price pressures in housing and services. With inflation still above the 2% target and the labor market softening, the policymakers face a delicate balancing act in its Dec 9-10 meeting. Markets are now fully pricing in a December rate cut of 25 bps, but some uncertainty remains due to missing October CPI data. Despite this gap, the Fed has made not signaled any deviation from market expectations. Meanwhile, with the next Fed Chair appointment approaching near Christmas, Trump announced last night he has made his pick and expects his nominee to cut interest rates.

Geopolitics

Broadening the lens, US officials met with Ukrainian negotiators over the weekend and are now heading to Moscow to push a revised peace plan. Though there are major sticking points, such as territorial concessions and security guarantees, Putin called it a possible basis for a future deal. As for the Middle East, reports of US-Iran tensions remain stiff. Analysts warn that any escalation could disrupt oil markets, drive inflation higher, and complicate the Federal Reserve's policy path. Both situations may trigger a short-term flight to safety, nudging yields and, by extension, mortgage rates, slightly lower.

Labor Market Softens

The US job market continues to show signs of cooling. The latest official data (September) reported modest levels of job creation, but employment ticked up to 4.4%, its highest level in four years. Gains are concentrated in healthcare and food services, while sectors like transportation, warehousing, and manufacturing are shedding jobs. Private payroll data suggests layoffs are accelerating, particularly in tech and retail, as companies adopt AI-driven efficiencies. Wage growth, still around 4.5% year-over-year, underscores lingering cost pressures. Looking ahead, economists expect job growth to slow further, accompanied by a slight uptick in the unemployment rate. This softening labor trend poses yet another reason for a December rate cut, even as inflation remains above target.

Key Economic Data Releases

• Monday, Dec 1: PMI, Construction Spending
• Tuesday, Dec 2: Fed Speeches from Powell & Bowman
  • Fed is in blackout mode for policy specifics, but tone matters
• Wednesday, Dec 3: ADP Employment
• Thursday, Dec 4: Initial Jobless Claims (week ended Nov 29)
• Friday, Dec 5: September PCE, September Personal Income & Spending

WEEKLY INTEREST RATE SNAPSHOT (Images)

*National average rates are provided by Bankrate.com and Bloomberg Professional as of 12/1/2025 and are not advertised rates from Rate, Inc.

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