FED: SF's Daly Eyes "One Or Two More" Cuts To Counteract Labor Weakness: Reuters

Reuters : https://www.reuters.com/business/feds-daly-sees-labor-market-vulnerabilities-ro om-cut-interest-rates-2026-02-06/on Friday published SF Fed President Daly (2027 FOMC voter)'s first interview since the January meeting, in which she "said she thinks one or two more interest rate cuts may be needed to counteract weakness in the labor market, where workers are "walking a knife's edge" with higher prices eating into their wages and scarce opportunities for new jobs. "I think we have to keep an open mind, a very open mind" on rates, Daly told Reuters in an interview". * Two cuts for 2026 is about where we expected Daly to have been in the December Dot Plot (see our pre-January FOMC meeting guesses below), though in general we think some of these names will have drifted to the higher side since that set of quarterly projections. * In the interview she says she supported the January hold "but frankly, I thought you could make a case for going ahead and taking a little more off". She's "a little more worried about the labor market than I am about inflation", but her threshold to reduce rates is that "you have to be pretty confident, like really confident, that the effects of the tariffs will roll off ... that inflation is really on a downward trajectory."

US DATA: Consumer Credit Jumps To End 2025, Overall Impulse Remains Subdued

Consumer credit jumped in December, with total consumer credit owned and securitized up $24.0B ($8.0B expected, $4.7B prior) in the highest reading for 12 months. The flow was split fairly evenly by recent standards, with revolving credit up $13.8B ($-1.7B prior) and nonrevolving $10.2B ($6.4B prior). * (Revolving makes up 25% of overall consumer credit, largely made up of credit cards; nonrevolving credit is basically made up of student and auto loans.) * That's a solid end to 2025 for credit growth, particularly for revolving/credit card activity, so bears watching though overall it hasn't been a major driver of consumption. * We saw some of the strongest credit card demand since 2022 in Q4 2025 per the Fed's latest SLOOS survey, with lending standards loosening slightly (and demand for auto loans dropped considerably, potentially boding ill for non-revolving growth). * Y/Y total consumer credit growth posted 2.4%, led by revolving (3.4%; non-revolving has been steady at 2% for several months). With the economy growing by well above these levels in nominal terms, this still means that consumers are deleveraging, with total credit as a % of GDP set to post continued 12+ year lows, albeit largely led by non-revolving as opposed to revolving.

ARGENTINA: International Reserves

"*ARGENTINE CENTRAL BANK RESERVES TODAY AT $44.94B" - Bbg

FED: Gov Cook: Risks Tilted Toward Higher Inflation

Gov Cook's speech Wednesday (link): https://www.federalreserve.gov/newsevents/speech/cook20260204a.htm sounded more hawkish on the rate outlook than her previously dovish leanings, while broadly hewing to the centrist view on the FOMC that further easing may be appropriate. Overall she sounds wary of declaring victory over inflation and won't lean toward further cuts unless she sees further evidence that it's returning to target. It's another sign the FOMC is minded to keep rates on hold for several months. * "At this time, I see risks as tilted toward higher inflation. As a result, I supported the FOMC's decision to hold the policy rate steady at our meeting last week. As I described, there is an argument for being optimistic about the path of inflation, but, until I see stronger evidence that inflation is moving sustainably back down to target, that is where my focus will be, in the absence of unexpected changes in the labor market.... I remain optimistic that inflation will soon return to a path toward our target, that the labor market is stabilizing, and that sustainable growth lies ahead. My optimism is tempered with caution. This is why I will remain vigilant in studying a wide range of incoming information so that I can pursue the best policy to achieve our dual-mandate goals. My future policy decisions will be guided by incoming data, my economic outlook, and the evolving balance of risks." * "Broadly, I see the U.S. economy as continuing to be resilient, with recent data indicating that growth in the second half of 2025 was even stronger than previously forecast. Inflation appears to have stalled stubbornly above our 2 percent goal, while at the same time the labor market appears to have stabilized in recent months. While the overall condition of the economy is solid, I am carefully watching sentiment, delinquencies, and other indicators that show a worsening outlook for low- and moderate-income households." * She sees inflation (and expectations) as under wraps, with core goods prices moderating after tariff passthroughs are complete, but "much uncertainty remains. The future direction of tariff policy is unclear. And, even when tariff levels are settled, uncertainty remains with respect to how long it will take for that price rise to be complete and whether it will take hold in inflation expectations." * While "Risks to the labor market persist", "the labor market is roughly in balance, but I am highly attentive to developments, knowing it can shift quickly." * And on productivity which some doves point to as a reason to expect inflation to come down, unlocking rate cuts, Cook sounds like her FOMC colleague Jefferson in sounding somewhat skeptical ("I am concerned that there is a dynamic inconsistency problem such that there could be a mismatch between the arrival of costs related to AI investment and the arrival of benefits, including higher productivity that is noninflationary.") * Also like Jefferson, "For all of 2025, I estimate the economy grew a bit better than 2 percent, and I see a similar rate of growth being maintained this year.". * She devotes a long passage to consumer sentiment readings: "I think about this two-speed or K-shaped economy when I attempt to take signal from various sentiment readings...the reasons for low sentiment are real and are deeply concerning. But they do not, in my view, reveal a signal about increased slack that we can tackle with our typical demand-side monetary policy. In fact, for the part of households' concerns related to the pain of inflation, the best thing we can do in our roles is to ensure that inflation returns to and stays at target." Some of the more dovish members, including SF Fed's Daly, appear to take consumer sentiment readings more seriously. But there appears to be a broader consensus to take such readings with a grain of salt, as it's been poorly correlated with aggregate "real" consumer activity data.