Market Movements - December 22, 2025

[Andrew Postell]

Last Week’s Economic Recap

Markets digested two major data points last week: the November employment report and CPI. Payrolls came in solid, reinforcing labor market resilience, while inflation surprised sharply to the downside. Core CPI rose just 2.6% YoY, well below the 3.0% consensus, marking the lowest pace since March 2021. Headline CPI printed +2.7% YoY, underscoring disinflationary momentum. Together, these figures signal easing price pressures alongside steady employment—a combination that reshapes the policy outlook heading into 2026.

Market Reaction and Rate Outlook

Treasuries rallied on the data, with the 10-year yield slipping to 4.10%, at one point. Mortgage-backed securities followed suit, gaining 6–8 ticks as volatility cooled. This move reflects growing confidence that the Fed will pivot toward rate cuts in early 2026. Futures now price in multiple cuts next year, and the curve is adjusting to a more dovish trajectory. Lower rates improve affordability and refinance potential, but they also introduce inflationary pressure to the economy.

The Week Ahead

This week is holiday-shortened, so expect lighter liquidity and muted price action. Key releases are limited, with second-tier housing data and regional Fed surveys on deck. Markets will likely consolidate recent gains rather than chase new highs, as participants position for year-end. With the Fed narrative shifting and rates trending lower, the tone remains constructive—but thin conditions can amplify moves, so stay nimble.

WEEKLY INTEREST RATE SNAPSHOT (Images)

*National average rates are provided by Bankrate.com and Bloomberg Professional as of 12/22/2025 and are not advertised rates from Rate, Inc.

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