FOMC Minutes from June 18 - Doves in the minority

July 9, 2025 6:48 PM UTC

FOMC minutes from June 18 show agreement to leave policy at 4.25-4.50%, and general agreement that the FOMC was well positioned to wait for more clarity. While there was some debate over the future outlook, doves appear to be in the minority. A couple were open to easing at the next meeting in July,

Preview: Due July 31 - U.S. Q2 Employment Cost Index - Returning to pre-pandemic pace

July 9, 2025 2:43 PM UTC

We look for the Q2 employment cost index (ECI) to increase by 0.7%, after two straight gains of 0.9% and the slowest since Q2 2021. A 0.7% rise would be consistent with trend returning to where it was before the pandemic. 

Putting Names to the FOMC Dots

July 7, 2025 5:35 PM UTC

There are nineteen FOMC dots. Seven hawks expect no easing this year, and two expect only one 25bps move. Eight are on the median seeing two 25bps moves, while two doves are looking for three. While only two have clearly signaled what their personal dot is, reasonable estimates can be made to identi

U.S. June Employment - Some signs of slowing activity, but lower unemployment suggests no urgency for Fed easing

July 3, 2025 1:09 PM UTC

June’s non-farm payroll is surprisingly strong overall with a rise of 147k, with 16k in net upward revisions, but private payrolls at 75k are weaker than expected, with 16k in net negative revisions. Unemployment unexpectedly fell to 4.1% from 4.2%, but average hourly earnings are weaker than expe

U.S. Assets and Valuation

July 3, 2025 9:30 AM UTC

    The U.S. equity market has returned to be clearly overvalued on equity and equity-bond valuations measures and is vulnerable to a new correction in H2 on any moderate bad news (e.g. further economic slowing and corporate earnings downgrades).   In contrast, U.S. Treasuries are at broadly fai

U.S. Fed's Barkin - Puts focus on unemployment

July 2, 2025 8:10 PM UTC

Fed's Barkin remains in no rush to ease though policy will depend on incoming data.

Preview: Due July 17 - U.S. June Retail Sales - Mostly subdued

July 2, 2025 3:20 PM UTC

We expect a 0.1% increase in June retail sales to follow two straight declines, with a 0.3% incase ex autos that will reverse a 0.3% May decline. Ex autos and gasoline, we also expect a 0.3% increase, after a 0.1% May decline that followed a 0.1% April increase. 

Preview: Due July 3 - U.S. June Employment (Non-Farm Payrolls) - Increasing signs of slowing, but not a recession

July 2, 2025 1:01 PM UTC

We expect a 75k increase in June’s non-farm payroll, significantly slower than May’s 139k though consistent with a slowdown in growth rather than an economy entering recession. We expect an in line with trend 0.3% increase in average hourly earnings and an uptick in unemployment to 4.3% after th

DM Central Banks: Overlooking Lagged 2021-23 Tightening and QT?

July 2, 2025 8:30 AM UTC

We are concerned that DM central banks are underestimating the lagged impact of 2021-23 tightening and ongoing QT, which impacts the transmission mechanism of monetary policy.  Central banks need to consider cyclical and structural issues, but also need a more rounded view of the stance and implica

Preview: Due July 15 - U.S. June CPI - A little more from tariffs

July 1, 2025 6:42 PM UTC

We expect June CPI to increase by 0.3% overall and by 0.3% ex food and energy, with the overall pace close to 0.3% before rounding but the core rate rounded up from 0.27%. This would still be the strongest core rate since January and reflect tariffs starting to feed through, something expected by Fe

Trump Tariffs: Poker Face?

July 1, 2025 12:55 PM UTC

Our central scenario (but less than 50%) is towards a scenario of compromise, with some agreements in principle or trade framework deals, delays for most other negotiating in good faith but with one or two countries seeing a reciprocal tariff rise e.g. Spain and/or Vietnam.  This could still be fol

U.S. and Asia Defense Partners

June 30, 2025 7:30 AM UTC

 ·        Japan, S Korea and Australia could eventually agree to some extra commitment to increase (self) defence spending in the next 5-10 years though perhaps not targets like NATO countries.  This could come as part of the trade deal negotiations currently underway.  Japan and S Korea

U.S. Q2 GDP to see only a modest rebound from a decline in Q1

June 27, 2025 6:05 PM UTC

The release of advance May trade and inventory data, plus May consumer spending, provides us with clearer signals on Q2 GDP, even if we have not yet seen any data for June. We currently expect a modest annualized gain of 1.4%, following a 0.5% decline in Q1, leaving a subdued first half of the year.

U.S. May Personal Income and Spending slip, Core PCE Prices above consensus but not alarming

June 27, 2025 12:59 PM UTC

May’s core PCE price index, while not alarming, is at 0.2% a little firmer than expected, with yr/yr growth rising to 2.7% from an upwardly revised 2.6% (from 2.5%) in April. Personal income and spending data is weak, down by 0.4% and 0.,1% respectively.

U.S. Fed's Kashkari - Expects two rate cuts this year, possible first cut in September

June 27, 2025 12:11 PM UTC

Kashkari's view puts him on the Fed's median dot. The skew on the dots is hawkish but the decision will depend on data.

U.S. Fed's Collins - Calling for patience, as are most Fed speakers

June 25, 2025 1:59 PM UTC

Fed's Collins, as are most Fed speakers, is backing the wait-and-see approach to policy, particularly in regard to tariffs. 

June Outlook: Trump’s Fluid Policies

June 25, 2025 10:00 AM UTC

All chapters of the June Outlook are now available and simply click the link below. 

Outlook Forecasts to download in Excel

June 25, 2025 9:30 AM UTC

Below is an Excel file that contains our headline forecasts for GDP, Inflation, Monetary Policy, and Exchange Rates.

EM FX Outlook: USD Less in Favor, but EM Mixed

June 25, 2025 8:05 AM UTC

·       The Chinese Yuan (CNY) will likely remain stable while trade negotiations with the U.S. continue.  We see a trade deal in our baseline (probably Q4) and then a small rise in CNY v USD due to general USD weakness. 
·       In terms of total returns for the remainder of 2025, th

Outlook Overview: Trump’s Fluid Policies

June 25, 2025 7:20 AM UTC

·       President Donald Trump still wants to use the tariff tool, and we see the eventual average tariff rate being in the 13-15% area, lowered by deals but increased by more product tariffs. Any lasting legal block on reciprocal tariffs will likely see the administration pivoting towards ot

Tariffs and the Timing of FOMC Easing

June 24, 2025 6:06 PM UTC

While two Fed Governors. Waller and Bowman, have suggested a July easing could be appropriate, testimony from Chairman Powell suggests a move that early is unlikely, though September is possible if inflation data continues to show a lack of feed through from tariffs. We, and Powell, expect some acce

U.S. Fed's Bostic - Sees one rate cut late this year

June 24, 2025 10:54 AM UTC

Fed's Bostic continues to see only one rate cut this year, not backing Bowman's dovish view given yesterday.

Equities Outlook: Choppy Then 2026 Gains

June 24, 2025 8:15 AM UTC

       Though the U.S. equity market has rebounded, we still scope for a fresh dip H2 2025 to 5500 on the S&P500 as hard data softens further to feed into weaker corporate earnings forecasts and CPI picks up and delays Fed easing.  However, the AI story is still a positive, while share buybacks

DM FX Outlook: USD uncertainty increases as Trump changes the rules

June 24, 2025 7:05 AM UTC

·       Bottom Line: After making initial gains after the election, the USD has followed a similar path to the first Trump presidency, falling back steadily this year as optimism on the economy has faded, with the introduction of tariffs contributing to more negative sentiment. Much as in the

U.S. Fed's Goolsbee - Impact of tariffs not as bad as feared

June 23, 2025 5:50 PM UTC

Fed's Goolsbee has added his voice to those of Waller and Bowman, noting that tariffs have lifted inflation less than feared.

Iran: Measured Next Steps?

June 23, 2025 3:17 PM UTC

  A measured or modest Iran retaliation could be used by the U.S. to seek a path back towards negotiation.  Israel would likely want to continue to degrade Iran nuclear and military facilities, but the U.S. could eventually pressure Israel to stop.  This is our baseline, though the military attac

U.S. Fed's Bowman - Openness to July easing a dovish shift

June 23, 2025 2:40 PM UTC

Fed Governor Bowman's openness to a July easing is a surprise, coming from someone who has recently been a hawk.

DM Rates Outlook: Yield Curve Steepening?

June 23, 2025 8:30 AM UTC

•    We see the U.S. yield curve steepening in the next 6-18 months. 2yr U.S. Treasury yields can step down with cautious Fed easing on a modest/moderate growth slowdown and also if the Fed keeps an easing bias in H2 2026. 10yr U.S. Treasury yields face a tug of war between lower short-dated y

U.S. Fed's Barkin - Contrasts dovish earlier remarks from Waller

June 20, 2025 4:53 PM UTC

Fed's Barkin sees no rush to ease. Earlier Fed's Waller said the Fed could move as early as July.

Preview: Due July 3 - U.S. June Employment (Non-Farm Payrolls) - Increasing signs of slowing, but not a recession

June 20, 2025 4:29 PM UTC

We expect a 75k increase in June’s non-farm payroll, significantly slower than May’s 139k though consistent with a slowdown in growth rather than an economy entering recession. We expect an in line with trend 0.3% increase in average hourly earnings and an uptick in unemployment to 4.3% after th

U.S. Outlook: Slowdown but not Recession, Cautious Fed Easing

June 20, 2025 2:14 PM UTC

•    Policy uncertainty remains high and final details of the tariffs will depend on the decisions of the courts as well as those of President Trump. However the magnitude of the tariffs is becoming easier to predict than the detail. Trump looks set to insist on a minimum average tariff of at

Fed: Hold Then Cautious Easing

June 18, 2025 7:27 PM UTC

Though the SEP reduced growth forecasts and boosted inflation, the guidance from the Fed remains that policy is on hold in the coming meetings.  Though the FOMC median still has two 2025 cuts, the breakdown shows that this was a close call and a lot of members see no cut or only 25bps. We look for

U.S. Fed's Powell - Expecting tariffs to feed into inflation despite recent softer data

June 18, 2025 6:48 PM UTC

Fed's Powell, while welcoming recent softer inflation data, is still wary of the risk from tariffs.

FOMC more pessimistic than March forecasts but not compared to May statement

June 18, 2025 6:23 PM UTC

The FOMC has left rates unchanged at 4.25-4.50% as expected. The median rate forecast is unchanged at 3.9% for end 2025 but the FOMC now sees only 25bps of easing in 2026 rather than 50bps, with 2027 still seeing 25bps, but the end 2027 rate is now seen at 3.4% from 3.1%, leaving a slightly hawkish

Preview: Due June 27 - U.S. May Personal Income and Spending - Core PCE Prices to match Core CPI

June 17, 2025 3:02 PM UTC

We expect a 0.1% rise in May’s core PCE price index, matching to core CPI, continuing to show limited tariff pass-through. Subdued data are also likely from personal income, which we expect to be unchanged, and personal spending, where we expect a 0.1% decline.

U.S. May Retail Sales - Two straight declines as confidence slides

June 17, 2025 12:50 PM UTC

May retail sales with a 0.9% decline are slightly weaker than expected. The ex auto data at -0.3% and ex auto and gas at -0.1% are negative too, though the control group which contributes to GDP was resilient with a 0.4% rise. 

Preview: Due June 17 - U.S. May Retail Sales - Autos to correct lower, underlying momentum subdued

June 16, 2025 12:07 PM UTC

We expect a 0.7% decline in May retail sales as auto sales show a sharp reversal from recent strength. Ex autos we expect a subdued 0.1% increase, with a 0.2% rise ex autos and gasoline. Both of these outcomes would match those of April.

Trump Tariffs: China and July 9 Reciprocal Deadline

June 12, 2025 7:17 AM UTC

 We attach a 65% probability to a U.S./China reaching a new trade deal that reduces the minimum overall tariff to 15-20% imposed by the U.S., most likely agreed in Q4 2025 and to be implemented in 2026.  However, a 35% probability exist of no deal and this could eventually mean higher tariffs (Fig