Good morning. High interest rates and the rising cost of funding were already a top concern for CFOs. Now, that concern could grow following a strong December jobs report—one of the key pieces of data assessed by the Federal Reserve—that has led some economists to predict there will be fewer rate cuts this year, or none.

The Labor Department reported on Jan. 10 that payrolls grew by 256,000 last month, up from 212,000 in November and above the forecast for 155,000. The unemployment rate dipped to 4.1% from 4.2%, also beating expectations.

Due to the stronger-than-expected jobs report, Bank of America economists revised the Fed outlook for this year: “We no longer expect any additional rate cuts,” economists wrote in a report on Monday. "Inflation is stuck above target, with risks skewed to the upside, activity is strong, and the labor market now appears to have stabilized."

Last week’s blowout jobs report was also a catalyst for a surge in bond yields. Markets responded and the yield on the benchmark 10-year Treasury, which rises as the price of the bond falls, briefly surged above 4.8% Monday morning, its highest level since November 2023, Fortunereported . All of this has left Wall Street to wonder if the Fed will be able to continue its rate-cutting regime in 2025.

Meanwhile, UBS expects that the Fed is unlikely to cut interest rates at its first policy meetings of 2025 but later on. “We expect data in the coming months to show slowing inflation and a softening labor market, allowing the U.S. central bank to start cutting again by the June policy meeting,” according to a UBS chief investment office report .

The December 2024 CPI report, which provides insights into the strength of inflation, is scheduled to be released on Wednesday. The key piece of data the Fed uses to measure inflation is the core Personal Consumption Expenditures (PCE) price index. PCE tracks the prices of goods and services purchased by consumers. PCE inflation increased year over year by 2.4% in November. The PCE data for December will be released on Jan. 31.

The Fed cut interest rates by a quarter-point in December. According to the agency’s forward guidance “dot plot,” the committee’s members penciled in just two quarter-point cuts for 2025, down a full percentage point from their September chart. Fed officials see the fed funds rate falling to 3.9% in 2025. That’s still far from the desired target rate of 2%.

BofA economists assess the risks for the next move by the Fed is skewed toward a hike. “In our view, hikes will be in play if year-over-year core PCE exceeds 3% and long-term inflation expectations become unanchored,” according to the report.