Company: NLY-PF
Filing Date: 2025-05-08
Form Type: 10-Q
Source: 0001628280-25-023811
Chunk: 5

Company: ANNALY CAPITAL MANAGEMENT INC
Filing Date: 2025-05-08
Form: 10-Q
Item: Part I, Item 2
Chunk 5
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 employment rose at a monthly average pace of 133,000 workers added in the first quarter – a modest decline from the average of 167,667 workers added per month in all of 2024. The unemployment rate ended the quarter at 4.2%, only modestly higher than the 4.1% rate at the end of 2024. The increase was driven by more people entering the labor force, with not all of them being able to find work. At the same time, wage growth, as measured by the year-over-year change in Average Hourly Earnings, fell from 4.0% in the fourth quarter to 3.8% in the first quarter. 

Inflation readings, as measured by the year-over-year changes in the Personal Consumption Expenditure Price Index (“PCE”), remain above the Fed’s 2% inflation target and progress on disinflationary measures has been slow. Total PCE prices over the 12 months ending in March rose 2.3% compared to the 2.6% recorded by the same metric at the end of December, while core PCE inflation, which excludes volatile food and energy prices, fell from 2.9% in December 2024 to 2.6% in March. Progress on inflation in the first quarter remained uneven, much like it had been over the past year. Moreover, the forecast has become increasingly uncertain due to the most significant increase in the effective tariff rate in decades.

The Fed conducts monetary policy with a dual mandate: full employment and price stability. Given the slow progress on inflation, the Federal Reserve Open Market Committee (“FOMC”) kept the target range for the Federal Funds rate unchanged at 4.25% - 4.50% at their March meeting, marking their second pause since cutting rates by 100 basis points at the end of last year. The Federal Reserve Chair Jerome Powell has emphasized that it is too soon to determine the appropriate monetary policy response to the tariffs, while acknowledging their inflationary impact. In addition, the FOMC has maintained its focus on the still positive growth outlook and reiterated their guidance that they are not in a hurry to act. Forecasts from the FOMC meeting in March show a median of two 25 basis point interest rate cuts for 2025. However, the recent deterioration of economic growth forecasts has raised the odds of additional rate cuts. Meanwhile, regarding the FOMC’s balance sheet policy, the Fed announced that it will slow the pace of decline