NETHERLANDS: PM Convenes Emergency Gov't Meeting Amid Splits Over ReArm Europe

Cleveland Fed President Hammack (hawk, non-2025 voter) maintains her skepticism over the case for further rate cuts absent evidence that inflation is heading to target - indeed her speech Tuesday is called "Show Me The Low Inflation". Her overall stance is that "it will likely to be appropriate" to hold rates at current levels "for some time":

• "As long as the labor market remains healthy, I am looking for broad-based evidence that inflation is sustainably returning to 2% before adjusting policy further...Given current economic conditions, it will likely be appropriate to hold the funds rate steady for some time. A patient approach will allow us to assess the health of the labor market, whether inflation is returning to 2% on a sustained basis, and how the economy is performing in the current rate environment."
• Hammack notes upside risks to inflation, with government policy shifts playing a part: "Taking the case of tariffs as one example, it is appropriate for policy to be patient in assessing their ultimate effects...given the recent history with elevated inflation, the risks to the inflation outlook appear skewed to the upside, and this could delay a return to 2% and further risk embedding elevated inflation into the economy."
• On inflation readings, while she calls market-based core PCE's 2.4% rate is a "more hopeful signal", "we will need to see further disinflation in market-based core, to readings below 2 percent."
• She parts ways with Chair Powell's recent assessment that policy is "meaningfully restrictive", calling current policy  "only modestly restrictive", and pointing out again that rates may already be at a neutral level:
• "broad financial conditions indices are accommodative, something which does not appear consistent with a view that policy is meaningfully restrictive. But considerable uncertainty surrounds this assessment, and we may be at or close to a neutral setting already."
• This stance is no surprise for a noted Committee hawk, having dissented to December's 25bp cut when she was a voter.

FRBNY EFFR for prior session:

• Daily Effective Fed Funds Rate: 4.33% (+0.00), volume: $96B
• Daily Overnight Bank Funding Rate: 4.33% (+0.00), volume: $273B

• Canadian building permits in 2024 +7.8% to a record high of CAD145B.
• In constant dollars total permits +3.7%; residential +6.3% to CAD52.5B. Single-family dwellings in 2024 -31% while multi-unit housing +12%.
• Q4 permits +1.2%, CAD37.5B worth of permits led by residential.
• In Dec., permits +11% MOM to CAD13.1B led by residential growth in Ontario and British Columbia.   
• Report is another sign the BOC's rate cuts that began in June is aiding domestic spending.