Core Viewpoint - The current 10-year yield is at 4.19%, influenced by recent comments from Federal Reserve officials, indicating a cautious approach towards interest rate cuts and a focus on labor market conditions rather than inflation [1][2][5]. Federal Reserve Insights - Fed officials have expressed mixed views, with some dissenting on rate cuts, highlighting uncertainty in the economic outlook [2][4]. - Philadelphia Fed President Pollson emphasizes the labor market's importance over inflation, while Chicago's Goulsby shows discomfort with the pace of rate cuts [3][4][7]. - The Fed is expected to adopt a "wait and see" approach, particularly in light of upcoming labor market data [5][6]. Labor Market and Economic Indicators - The upcoming jobs report is anticipated to significantly influence market expectations regarding future rate cuts, especially if it shows weaker-than-expected results [8][10]. - The unemployment rate remains low by historical standards, with a current rate around 4.4% to 4.5%, which is considered close to full employment [11][12]. Fixed Income Market Outlook - The fixed income market has performed well this year, with income returns being a significant driver, although future income returns may decrease due to lower yields [13][15]. - High-quality bonds are expected to see price appreciation in 2026, driven by potential Fed rate cuts, while riskier assets may not benefit similarly due to elevated default rates [16][17].

And for more on that, I want to welcome into the program Joe Leavia, counselor to Treasury Secretary Bessett. Joe, thanks so much for joining me. Always great to see you.>> Thank you. Thank you. >> The Fed yesterday increased their outlook for the economy next year.They now see GDP growth of 2.3%. Fed Chair Powell said that he thinks that any price increases from tariffs could peak in the first quarter. where they see inflation falling to 2.5% next year, but the unemployment rate is expected to hold at 4.4% ...

And for more on that, I want to welcome into the program Joe Leavia, counselor to Treasury Secretary Bessett. Joe, thanks so much for joining me. Always great to see you.>> Thank you. Thank you. >> The Fed yesterday increased their outlook for the economy next year.They now see GDP growth of 2.3%. Fed Chair Powell said that he thinks that any price increases from tariffs could peak in the first quarter. where they see inflation falling to 2.5% next year, but the unemployment rate is expected to hold at 4.4% ...

talking about the economy and maybe what the Fed's going to do. Uh we're going to talk about that, the markets, uh and everything else. Want to bring in David Servos.He is chief market strategist at Jeffre, a CNBC contributor. Uh good morning to you. We'll talk to Austin Goldby later.I'm curious what you thought of what you heard earlier this week from the Federal Reserve and uh what you think it portends and were you surprised that the equity markets actually moved up on the back of this news. You [clears ...

CEO and chief strategist Daniel D. Martino Booth. First, your initial thoughts because this is a lot.These are a lot of changes. >> There there are a ton of changes and I I'm starting to feel like we're like it's a schizophrenic Federal Open Market Committee. I mean, they're swinging from pendulum to pendulum.Hawks are being doves. Doves are being I mean, it's it's just >> Yeah. Goulby set this out.Goulsby is always a dove. >> Goulsby I mean, the Chicago Fed is always the most dovish fed person and he's doi ...

And if I could follow up on the outlook there, it it it seems like with the additional GDP growth coupled with easing inflation and a fairly steady unemployment rate, this seems like a pretty optimistic outlook uh for next year. Um what's given rise to that. Is this an early bet on AI.Is there some sense of uh improve improving productivity out there. What's what's driving that. >> So a number of things are driving uh what's happening in the forecast.And I I would say if you if you look broadly at outside f ...

And if I could follow up on the outlook there, it it it seems like with the additional GDP growth coupled with easing inflation and a fairly steady unemployment rate, this seems like a pretty optimistic outlook uh for next year. Um what's given rise to that. Is this an early bet on AI.Is there some sense of uh improve improving productivity out there. What's what's driving that. >> So a number of things are driving uh what's happening in the forecast.And I I would say if you if you look broadly at outside f ...

So the Federal Reserve has now cut rates again. Third meeting in a row, a 25 basis point cut this time. This is there were three dissents to this cut.Uh the first time there were three descents in about six years. So September of 2019. In this meeting, Steven Myron desented because he would like to see a half a percent cut.And then on the other side of this, Kansas City Fed President Jeff Schmid as well as Chicago President President Austin Goulby wanted to keep the things keep pause rate cuts where we are ...

Well, I'm of the view that the nominal neutral rate. Is no harden 3%. So I'm of the view that the Fed has no business being almost 100 basis points above neutral when you consider the trend in underlying inflation, which has been gradually to the downside but is on the downside and the unemployment rate.No, keep in mind we always talk about how inflation is still above the Fed's target. The Fed has a dual mandate and the unemployment rate is just a snake. Now to the second decimal place below four and a hal ...

Core Viewpoint - The U.S. economy requires significant interest rate cuts to alleviate high borrowing costs and support labor market recovery [1][2][7]. Monetary Policy - Federal Reserve governor Stephen Miran advocates for large interest rate cuts to achieve a neutral monetary policy quickly, arguing that current rates are restrictive and detrimental to economic growth [2][5]. - The Federal Open Market Committee (FOMC) is divided on the necessity of further rate cuts, with discussions ongoing about the impact of a softening labor market and persistent inflation [2][3]. Interest Rate Cuts - Miran suggests a series of 50 basis point cuts, citing recent positive job data and low inflationary risks as justification for this approach [5][6]. - The Fed has already implemented two rate cuts this year, bringing the federal funds rate to a range of 3.75% to 4% [3]. Labor Market and Unemployment - The rising unemployment rate is attributed to tight monetary policy, and Miran expresses concern that failure to cut rates could hinder labor market recovery [6][7]. - Miran emphasizes the need for a forward-looking approach in policy-making to address the challenges in the labor market [7]. Housing Market - Miran highlights the importance of easing mortgage rates, noting that while financial conditions may appear loose due to the stock market, the housing market remains tight [8]. - He believes that cutting interest rates will eventually lead to improved financial conditions in the housing market [8].