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Why bond investors are losing faith in Fed’s soft-landing
After three quarter-point cuts late last year, the Federal Reserve looks set to sit on its hands with rates parked around 3.5 to 3.75%, as officials signal they’ve done enough for now. Inflation has cooled, jobs are still there, and Washington is flirting with fresh fiscal sugar hits and on the surface, it all adds up to a gentle landing. However, bond investors aren’t easing into comfort; they’re stretching. The big move has been into longer-dated government bonds, a tactic known as extending duration. Duration is bond shorthand for how sensitive a bond’s price is to interest rate changes, aka interest-rate risk. The longer the maturity, the harder the price swings when rates move. Investors only take that risk when they believe rates are headed down or at least stuck. That’s the consensus trade, and it’s becoming crowded. Futures markets are now pricing less than two rate cuts next year, which is more of a polite pause than an easing cycle. Yet investment-grade corporate bonds are trading at spreads - the extra yield paid over U.S. Treasuries - aka the risk premium - last seen when dial-up internet was still a thing. At roughly 70 basis points, investors are being paid very little for taking cor
Outlook
Q1'26 Outlook: AI lifts growth; tariff risks linger
As 2026 begins, the global economy is displaying an unexpected degree of resilience. United States tariffs, political unpredictability and the structural slowdown concerns that dominated 2025 have not derailed growth to the extent many anticipated. Instead, an extraordinary boom in artificial intelligence investment, particularly in the United States, is cushioning the impact of trade frictions and reshaping the global macro narrative. Across analysis from Fitch Ratings, S&P Global Ratings and global asset manager T. Rowe Price, a common theme emerges: data-centre construction, semiconductor capacity build-out, and AI software and hardware investment are no longer abstract “future productivity” bets. They have become the single most powerful driver of near-term output, corporate spending and financial market performance. Yet, beneath the surface of this uplift, vulnerabilities remain. Growth is narrow, tariff policy is unpredictable, labour markets are fragile, and valuations, especially in AI-linked sectors, are stretched. The question for 2026 is whether the AI boom represents the early stages of a structural transformation or merely the late stages of a speculative cycle masking deeper fragilities.Fitch: World GD
Outlook
Trump threatens to fire and sue Fed Chair
U.S. President Donald Trump has threatened to fire and sue Federal Reserve Chair Jerome Powell. Trump launched his latest attack against Powell in a press conference with Israel’s Prime Minister, Benjamin Netanyahu. He repeated false claims about the cost of a renovation of the central bank headquarters, told reporters that he might file a lawsuit against the Fed chair for “gross incompetence”, and called him a “fool”. “I mean, Biden reappointed him. It’s too bad. You would have thought he wouldn’t have done that,” Trump said, without any acknowledgment that he had first appointed Powell himself in 2018. “I’d love to fire him. Maybe I still might,” Trump said. Trump claimed the building renovations cost US$4.1 billion when Powell had pointed out the costs were US$2.5 billion. This comes as Powell’s term as the Fed Chair ends in May. While his chairmanship will come to an end at this time, Powell will still have two years left on his term as governor and has refused to say whether he will stay on the Fed. Trump also hinted that he will reveal his pick for Powell’s successor this month. He has made it clear he intends to pick a candidate who aims to keep interest rates low and never “disagree” with him.
Outlook
Fed minutes reveal divide over December rate cut
Minutes from the Federal Reserve’s December policy meeting showed officials were sharply divided over the decision to cut interest rates amid lingering inflation concerns and uncertainty over the economic outlook. The minutes, released on Tuesday (Wednesday AEDT), detailed discussions from the Federal Open Market Committee’s 9-10 December meeting, which ended with a 9–3 vote to lower the federal funds rate by 25 basis points to a range of 3.5%–3.75%. It marked the most dissents since 2019 and highlighted deep divisions within the committee. “Most participants judged that further downward adjustments to the target range for the federal funds rate would likely be appropriate if inflation declined over time as expected,” the document said. However, policymakers differed over how quickly and how far rates should fall: “With respect to the extent and timing of additional adjustments to the target range for the federal funds rate, some participants suggested that, under their economic outlooks, it would likely be appropriate to keep the target range unchanged for some time after a lowering of the range at this meeting,” the minutes said. The minutes also revealed that several officials viewed the decision as a close call.
Outlook
Tax cuts helping US economy look to a more stable 2026
The United States could ride into a stronger 2026 economy, partially thanks to tax cuts from the Trump administration. This year saw a series of highs and lows for the Stateside economy, after President Donald Trump resumed office for his second term back in January. He returned to the White House and immediately launched into a series of bold and controversial fiscal decisions and policies, most notably a vast increase in global tariffs for a range of U.S. trading partner nations. His ‘One Big Beautiful Bill’ act, signed into law in July, pushed forward a series of tax cuts and credits that are still creating a tailwind to carry through into next year. Additionally, uncertainty and fear around his administration's tariffs are expected to settle in the first half of 2026. Investment in artificial intelligence is also expected to stay strong and help with a more stable and stimulus-focused economy for next year.

Outlook
Hassett says Federal Reserve is behind on rate cuts
National Economic Council Director Kevin Hassett said on Tuesday (Wednesday AEDT) that the Federal Reserve is not cutting interest rates quickly enough, despite the United States economy growing at a much faster-than-expected pace in the third quarter. Hassett, a leading contender to succeed Federal Reserve Chair Jerome Powell when his term ends in May, argued that the rapid expansion of artificial intelligence is lifting economic growth while at the same time placing downward pressure on inflation. “If you look at central banks around the world, the U.S. is way behind the curve in terms of lowering rates,” Hassett told CNBC in a “Money Movers” interview. The comments came after data showed the U.S. economy expanded at an annualised rate of 4.3% in the third quarter, well above forecasts of 3.3%. Hassett said the strength of the expansion reflects structural improvements in productivity linked to artificial intelligence. “The artificial intelligence productivity boom is really clearly in the data”, Hassett said, adding that growth outcomes have consistently beaten expectations. On average, he said, citing Bloomberg data, economic growth has outperformed forecasts 94% of the time. Hassett also pointed to Presid
Outlook
RBA weighs possible rate hike risk in 2026
Australia’s central bank considered whether a rise in interest rates might be needed in 2026 after a recent pick-up in inflation, according to the latest meeting minutes, but judged it would take more time to assess whether the pressures would persist. Minutes from the Reserve Bank of Australia’s December policy meeting showed the board believed inflation risks had increased following stronger-than-expected consumer price readings in October and the September quarter. However, members cautioned that part of the lift could reflect volatile factors, noting that the upcoming December quarter data would be critical. While welcoming the inaugural release of the complete monthly consumer price index (CPI), the board flagged challenges in interpreting the new data series. “Members noted that it would take time to understand the properties of the new monthly CPI data. Furthermore, as the November Statement had set out, monthly data are inherently more volatile than quarterly data, and the difficulty of seasonally adjusting some components at a monthly frequency (owing to their short history) would make the trimmed mean and other measures of the underlying monthly inflation rate less reliable for a period,” the minutes said.
Outlook
The Founders: Petr Adamek on entrepreneurship, AI
Petr Adamek has helped many entrepreneurs and start-ups grow while also experiencing the rapid rise of artificial intelligence (AI). Adamek started out studying AI in the Czech Republic during the 90s and has since started working at the Canberra Innovation Network in the early 2010s to help entrepreneurs break into the market.Credit: Pure Public RelationsAdvancements in AIWhen Adamek was studying AI, he said it was vastly different to how we experience it today when he created a program for filling out a tax return. “It was not the chatbot the way we know it today, because it was the system was asking you questions and you were answering, so that's how it was different,” he tells Azzet. He says the philosophy of AI has advanced immensely to the point where it is accessible to everyone. “AI has become so mature and so available to everyone that what we saw in the past being done mostly by entrepreneurs,” he says. He said the growth of AI in Australia will be greatly influenced by global trends. Over the next decade, he expects AI to evolve to the point where it is more than a place to search for information as it is now. “AI will be not only the area of information and providing me with service, but it will al
Outlook
Fed's Williams says policy well set, inflation to ease
New York Federal Reserve President John Williams said the United States central bank’s recent interest rate cut has left monetary policy in a strong position heading into 2026, maintaining confidence that inflation pressures will continue to moderate while the labour market cools gradually. Speaking on Monday after the Federal Reserve lowered its benchmark overnight rate by 25 basis points to a 3.50%–3.75% range on 10 December, Williams said the decision struck the right balance between inflation risks and growing softness in employment conditions. “Monetary policy is well positioned as we head into 2026,” Williams said at an event hosted by the New Jersey Bankers Association in Jersey City. With the recent easing, the rate-setting Federal Open Market Committee “has moved the modestly restrictive stance of monetary policy toward neutral”. Williams stressed that returning inflation to the Fed’s 2% target remains critical, but not at the expense of the labour market. Balancing inflation risks and a cooling labour market“It is imperative that we restore inflation to our 2% longer-run goal on a sustained basis," he said, adding: “My assessment is that in recent months, the downside risks to employment have increased as the