December non-farm payroll data far exceeded expectations, and interest rate cut expectations have been postponed to September

According to the Zhitong Finance APP, the non-farm payroll data for December released on Friday far exceeded expectations, leading to a significant decrease in market expectations for the Federal Reserve to cut interest rates before September. At the same time, a major bank indicated that the risks of future policy adjustments may lean towards interest rate hikes. Tom di Galoma, head of fixed income at Curvature Securities, stated, "This strong employment report exceeded expectations in almost every aspect, essentially indicating that future inflationary pressures will increase." According to Bloomberg's market data based on federal funds futures, prior to the release of the December employment data, the market fully expected the Federal Reserve to cut rates for the first time in July. However, after the employment report was released, the expectation for a rate cut was pushed back to September. Meanwhile, the Bank of America team stated on Friday that they believe "the risks of future policy adjustments lean towards rate hikes," although their basic expectation remains that the Federal Reserve will pause rate hikes or cuts for an extended period. The number of non-farm jobs added in December reached 256,000, far exceeding market expectations. This is good news for the economy, but a blow to market participants hoping for sustained rate cuts in 2025. At the same time, a survey by the University of Michigan showed that consumer expectations for future inflation rose significantly this month, further weakening the possibility of rate cuts. In response to Friday's data, both the U.S. stock market and the Treasury market experienced sell-offs. All three major stock indices closed lower, with the Dow Jones Industrial Average falling nearly 700 points. Meanwhile, the U.S. Treasury market also saw significant declines, with the yields on 10-year and 30-year Treasury bonds rising to their highest levels in 14 months. According to Bloomberg data, there is a discrepancy between the expected policy path of the Federal Reserve and the CME FedWatch tool. The CME tool indicates that the likelihood of the Federal Reserve cutting rates by at least 25 basis points by June or July of this year remains above 50%. This discrepancy mainly arises from the different ways the two sources calculate the target range for the federal funds rate. The CME tool captures the overall market expectations for the target range, while Bloomberg's data focuses more on specific points within the target range. With strong performance in the labor market and rising inflation expectations, investors are becoming more cautious about the future direction of the Federal Reserve's monetary policy. Although there is still a possibility of rate cuts in the market, the risks of rate hikes are gradually increasing, and the interest rate path in the short term remains full of uncertainty