A Harder Landing and the Fed

September 5, 2024 9:30 AM UTC

Though our baseline view is for a soft landing for the U.S. economy and the Fed cutting to 3.00-3.25% by end 2025 (here), uncertainty exists over the scale of the slowdown.  If the U.S. economy has a harder landing (stagnation/technical recession with 20-25% probability), then the Fed could likely

Fed Faster Than ECB and BOE?

August 29, 2024 2:05 PM UTC

The Fed will likely ease by more than the ECB and BOE by June 2025, both given pro-activeness from the Fed and also the big gap between the current policy rate and Fed’s assessment of neutral rates.  We see a cumulative 175bps of cuts by end June 2025.  ECB hawks however are unlikely to stop a c

FOMC View Change: 75bps of Easing in 2024, 150bps in 2025

August 28, 2024 11:45 AM UTC

The dovish tone from Fed Chairman Jerome Powell’s Jackson Hole speech on Friday and the FOMC minutes from July 31 on Wednesday suggest the Fed is almost certain to start easing in September, though only if August’s non-farm payroll is surprisingly weak would 50bps become likely. We continue to e

Israel/Hezbollah War Risks

August 26, 2024 8:02 AM UTC

The probability of an Israel/Hezbollah war in the next 12 months has move up from low to modest probability, but would be a high impact event geopolitically and for global markets.  For global markets, a distinction would be drawn between an Israel/Hezbollah war that did not involve Iran/U.S. and o

Powell Jackson Hole Guidance

August 23, 2024 2:38 PM UTC

  Fed Powell clearly signaled a Sep 18 FOMC cut, but his analysis on the economy is softer than harder landing.  Though the option of 50bps was not ruled out, the comments from Powell and other Fed officials are more consistent with 25bps than 50bps.  Nevertheless, the Fed is now more focused on

Fed Decision Making/H1 2025 Fiscal Tensions and Yield Curve Steepening

August 19, 2024 8:15 AM UTC

2yr U.S. Treasury yields can fall gradually by end 2025 to 3.25%, as a more neutral Fed Funds era is discounted.  10yr yields ability to decline on a soft landing is more difficult, given high net supply facing the market.  We also remain concerned that the U.S. will see some temporary fiscal stre

U.S. Fed's Musalem seems comfortable with state of economy

August 15, 2024 2:00 PM UTC

Fed's Musalem is pleased with recent inflation data, not alarmed by recent activity data.

FOMC Minutes Preview: Considering Increasingly Balanced Risks

August 14, 2024 5:54 PM UTC

FOMC minutes from the July 31 meeting are due on August 21. We expect the minutes will show a cautious tone on inflation, needing to see more data before easing, but increasing signs of concern over rising unemployment, which July non-farm payroll data will have increased. Still, the tone on inflati

U.S. Fed's Bostic - Rate cut is coming, waiting for data

August 13, 2024 7:36 PM UTC

Fed SLOOS on Bank Lending mostly less negative

August 5, 2024 6:22 PM UTC

The Fed’s Q3 Senior Loan Officer Opinion Survey of bank lending practices has a less negative tone in terms of both supply and demand, suggesting limited downside risk to business investment.  The year to date showed a less negative tone in Q1 relative to 2023, and while Q2’s findings were simi

U.S. Fed's Barkin - Seemed in no rush to ease in Saturday comments

August 5, 2024 11:45 AM UTC

U.S. Fed's Goolsbee - Dovish, but won't over-react to one number

August 2, 2024 4:44 PM UTC

FOMC: September Easing on the Table but not a Commitment

July 31, 2024 7:38 PM UTC

The FOMC statement made fairly subtle changes to the language on inflation, with more significant dovish shifts made in the language on employment. The Fed is not willing to signal that a September easing is a done deal. However the tone of Fed Chairman Jerome Powell’s press conference was general

FOMC leaves rates unchanged, but statement gives more attention to employment risks

July 31, 2024 6:18 PM UTC

The FOMC has made some adjustments to its statement to signal that it is closer to cutting rates, but the key sentence that “the Committee does not expect it will be appropriate to reduce the target rate until it has gained greater confidence that inflation is moving sustainably toward 2%” remai

FOMC Preview for July 31: Opening the Door for Data-Dependent Easing

July 26, 2024 2:18 PM UTC

Bottom Line: The FOMC meets on July 31 and while a change in rates remains unlikely, the FOMC is likely to signal that easing is possible if data before the next meeting on September 18 provides further evidence of falling inflationary pressure. This will see changes to the wording of the statement,

Biden Drops Out, But Yield Curve Still to Steepen

July 22, 2024 8:10 AM UTC

President Joe Biden dropping out will create more uncertainty about the U.S. presidential race, but also crucially mean that the House of representative race is a close call.  This could stall some Trump trades, though we still see a swing to a positive 10-2yr U.S. Treasury yield curve – given Fe

Trump 2.0: Markets Guessing Policy Priorities

July 18, 2024 9:10 AM UTC

 If Trump is elected president we still feel that the top priorities for implementation will likely be reducing immigration and making permanent tax cuts that are due to lapse in 2025. Trump would likely jawbone on all issues, but actual policy changes are more important for persistent moves in mar

U.S. Fed's Waller - Eyes easing, will watch data over next couple of months

July 17, 2024 1:49 PM UTC

U.S. Fed's Kugler - Expects easing later this year, timing unclear

July 16, 2024 6:58 PM UTC

Kugler's cautious comments have a slightly dovish lean.

EZ and UK Government Bonds: Decoupling From the U.S.?

July 12, 2024 9:37 AM UTC

Different economic and inflation dynamics, plus no constraint from trade weighted exchange rates, means that the ECB and BOE can cut irrespective of the Fed in the coming quarters.  This can see 2yr yields decline, though less so in Germany where a 2.5% ECB depo rate is already discounted.  10yr y

U.S. Fed's Daly and Musalem welcome CPI

July 11, 2024 5:30 PM UTC

Fed's Musalem and Daly have welcomed the CPI data, without giving any signal for a near-term easing.

Israel and Hezbollah: Tensions or War?

July 9, 2024 2:28 PM UTC

Tensions are growing between Israel and Hezbollah, though the odds of a war in the next 6 months remain modest.  Military strategists note that such a war would require a large scale ground offensive and this is difficult given the war in Gaza.  

US Equities: Soft v Harder Landing More Than Politics

July 4, 2024 11:05 AM UTC

The U.S. equity market sees positives and negatives behind the volatility of U.S. presidential expectations, partially as Donald Trump is seen to be in favour of lower corporate tax rates.  We see the soft versus harder landing for the U.S. economy as being more important, as a harder landing could

FOMC Minutes from June 12 - Economy Seen Cooling But Little Discussion of Easing

July 3, 2024 6:52 PM UTC

FOMC minutes from June 12 show that the vast majority assessed that growth in economic activity appeared to be gradually cooling and the views expressed on inflation are cautiously optimistic. However there was agreement that easing would not be appropriate until they had gained greater confidence o

U.S. Fed's Powell - Disinflation showing signs of resuming

July 2, 2024 1:51 PM UTC

EM After the Elections: Fiscal Focus and Inflation Questions

July 1, 2024 8:05 AM UTC

Enhancing fiscal credibility is key post-election in India and S Africa, but also for Brazil.  India, will do this in the 3 week of July, but S Africa needs to move from ANC/DA led coalition optimism to reality quickly. Brazil needs to stop the vicious circle of sentiment building up on fiscal slip

U.S. Fed's Daly - PCE prices good news

June 28, 2024 1:31 PM UTC

FOMC Minutes from June 12 to Look Less Hawkish Than Those from May 1

June 27, 2024 6:51 PM UTC

FOMC minutes from June 12 are due on July 3. We expect less alarming inflation data seen since the previous meeting on May 1 will see the tone of the minutes less hawkish than those from May 1. That could support a view that the Fed might ease by more this year than the one 25bps move seen in the la

U.S. Fed's Cook - Appropriate to reduce rates at some point

June 25, 2024 4:13 PM UTC

DM Rates Outlook: Rate Cuts Arrive Except Japan

June 24, 2024 8:45 AM UTC

•    For U.S. Treasuries we see a steady easing process from the Fed from September, which can allow 2yr yields to fall consistently.  However, the decline in H2 2024 will be slower at the long-end from traditional yield curve steepening pressures and then we see fiscal stress in H1 2025 unde

U.S. Outlook: Economy Starting to Lose Momentum

June 20, 2024 6:17 PM UTC

•    The U.S. economy is starting to lose momentum after a surprisingly strong second half of 2023, and we expect the loss of momentum to become more apparent in the second half of 2024, causing a slowing in employment growth from its current strong pace. We expect inflation to resume a gradua