A Good Start to 2025

The consumer is healthy and confident

Summary: The US economy is off to a good start in 2025. The consumer is healthy and confident. But the Fed doesn't seem eager to go with the flow. Rate cuts appear to be on pause.

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Macro

A good start to 2025
"Overall, the U.S. economy starts the year in good shape. Economic growth was quite strong in 2024. Inflation has fallen considerably from its peak two and a half years ago, though it remains somewhat above the Fed's 2 percent objective. The labor market is solid, with the unemployment rate still relatively low and Americans, on average, bringing home paychecks that are growing faster than inflation." – Federal Reserve Governor Lisa Cook

"I continue to believe that the U.S. economy is on a solid footing." – Federal Reserve Governor Chris Waller

"They see a pretty good economy. I would say now our European CEOs see a much tougher environment, but our U.S. CEOs, this is even pre-election, saw a pretty good environment. They generally see inflation coming down, and so for most of them, they feel pretty good." – Blackstone (BX 0.00%↑) President Jonathan Gray

"Today, the U.S. economy begins the new year on a strong footing, with still elevated inflation and a solid labor market." – Federal Reserve Governor Michelle W. Bowman

"2025 is off to a great start" – Delta Air Lines (DAL 0.00%↑) CEO Ed Bastian

Surging business and consumer confidence is providing optimism for 2025
"...measures of business confidence, both large and small, have improved significantly over the last two months. The palpable shift in sentiment gives us confidence that the current softness is transient and that we should soon enter a period of renewed strength in our core markets." – Commercial Metals (CMC 0.00%↑) President & CEO Peter Matt

"Post-election, there is some more optimism weaving into the discussions and the outlooks that we're having — we're hearing about from customers…there is some more optimism weaving into our conversations with customers about '25 outlook." – MSC Industrial Direct Co. (MSM 0.00%↑) CEO Erik Gershwind

"...U.S. consumer and business confidence surged since November…" – Radius Recycling (RDUS 0.00%↑) Chairman & CEO Tamara Lundgren

"Post-election consumer sentiment appears to be improving, but it remains well below pre-pandemic levels likely because of higher prices." – Federal Reserve Governor Michelle W. Bowman

The US consumer is healthy
"The US consumer is financially healthy and continues to prioritize spending on experiences." – Delta Air Lines (DAL 0.00%↑) CEO Ed Bastian

Inflation progress has stalled despite earlier improvements, raising risks for 2025
"The rate of inflation declined significantly in 2023, but this progress appears to have stalled last year with core inflation still uncomfortably above the Committee's 2% goal. But given the lack of continued progress on lowering inflation and the ongoing strength in economic activity and in the labor market, I could have supported taking no action at the December meeting." – Federal Reserve Governor Michelle W. Bowman

"Several observed that the disinflationary process may have stalled temporarily or noted the risk that it could. Almost all participants judged that upside risks to the inflation outlook had increased. As reasons for this judgment, participants cited recent stronger-than-expected readings on inflation and the likely effects of potential changes in trade and immigration policy." – FOMC Minutes

"Price increases have cooled notably over the past two and a half years, but, despite this significant progress on disinflation, there is still further to go before reaching our inflation target of 2 percent" – Federal Reserve Governor Lisa Cook

Recent rate cuts have eased policy restrictiveness significantly
"Over time, I still think it will likely be appropriate to move the policy rate toward a more neutral stance. However, the 100 basis points of rate cuts since September have notably reduced the restrictiveness of monetary policy." – Federal Reserve Governor Lisa Cook

But the Fed will proceed with further rate cuts with caution
"Since September, the labor market has been somewhat more resilient, while inflation has been stickier than I assumed at that time. Thus, I think we can afford to proceed more cautiously with further cuts." – Federal Reserve Governor Lisa Cook

"My bottom-line message is that I believe more cuts will be appropriate. As always, the extent of further easing will depend on what the data tell us about progress toward 2% inflation." – Federal Reserve Governor Chris Waller

"I am in favor of adjusting policy gradually going forward and only in response to a sustained change in the tone of the data. With inflation close to target and growth showing continued momentum, I believe we are near the point where the economy needs neither restriction nor support and that policy should be neutral." – Kansas City Fed President Jeff Schmid

All eyes are now on the new administration's policies
"In the coming months, I look forward to seeing the impacts of the new administration's policies on the economy and assessing how monetary policy should respond going forward." – Federal Reserve Governor Michelle W. Bowman

International