TARIFFS: Next Slate Of SCOTUS Opinion Days Announced

The DMO has announced that it will sell GBP4.75bln of the 4.00% May-29 Gilt (ISIN: GB00BVP99566) at its auction next Wednesday (21 Jan).

• US EIA: CRUDE OIL STOCKS EX SPR +3.39M TO 422.4M IN JAN 09 WK
• US EIA: DISTILLATE STOCKS -0.03M TO 129.2M IN JAN 09 WK
• US EIA: GASOLINE STOCKS +8.98M TO 251.0M IN JAN 09 WK
• US EIA: CUSHING STOCKS +0.74M TO 23.6M BARRELS IN JAN 09 WK
• US EIA: SPR +0.21M TO 413.7M BARRELS IN JAN 09 WK
• US EIA: REFINERY UTILIZATION WEEK CHANGE +0.6% TO 95.3% IN JAN 09 WK

Philadelphia Fed President Paulson (2026 voter) largely repeats previous comments on her monetary policy outlook for the year in a speech Wednesday. She's the most dovish of the 4 regional voting presidents this year. We would think she's a little below the median participant in the Dot Plot (ie looking for at least 2 cuts) though her outlook suggests that she's not looking for a cut early in the year and certainly not at her first meeting as an FOMC voter at end-January.

• She says "I view the current level of the federal funds rate as still a little restrictive" and her cautiously optimistic appraisal of the inflation outlook combined with "a slowing labor market" "argue against tighter monetary policy". Overall "some modest further adjustments to the funds rate would likely be appropriate later in the year" if her outlook pans out.
• "I see a decent chance that we will end the year with inflation that is close to 2 percent on a run-rate basis; that is, 12-month inflation may still be a little elevated, but three-month inflation will be 2 percent by the end of the year. Yesterday’s [December] CPI inflation release for December doesn’t change my assessment.
• Paulson says her cautious optimism is based on multiple factors, including having "already seen a lot of the price adjustments" in goods as a result of tariffs. However Paulson repeats her previous caution in noting that "producers may still have some more price changes to make. The data for January will be especially useful for gauging this because the beginning of the year is a natural time for firms to change prices."
• She doesn't see any evidence that "tariff-induced price pressures are leading to broader inflation." While supercore inflation is "still elevated", "it is moving in the right direction". And on housing inflation, "here the news is unambiguously good" with both recent data and forward looking indicators pointing to continued progress.
• On the labor market: "While the labor market is clearly bending, it is not breaking...still, labor market risks have risen and that has been an important factor in my support for the 75 basis points of cuts that the FOMC did last year. I will be monitoring labor market developments closely."
• And her she notes as part of a long passage on the divergence between strong GDP growth and a softer labor market that "typically, when GDP and labor market signals are in conflict, the labor market signal turns out to be more accurate". And on labor market risks, "my baseline outlook is pretty benign and does not take strong signal from Q3 growth".