Federal Reserve
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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
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
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
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
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
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
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
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
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
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
June 11, 2025 4:01 PM UTC
The June 18 FOMC meeting looks highly likely to leave rates unchanged at 4.25-4.5%. We expect only marginal changes to May’s statement and the Fed’s median forecasts from March, with no change at all in the median dots on rates. Chairman Powell at the press conference may welcome recent signal
June 10, 2025 9:00 AM UTC
The large U.S. budget deficit has helped push up 10yr real yields to 2% in 2024/2025, but both the budget deficit (heavy issuance) and government debt trajectories (sustainability and rating concerns) are key going forward if the 10yr budget bill passed is similar to the House Bill. Foreign acco
June 4, 2025 6:15 PM UTC
The latest Fed Beige Book shows activity declining slightly, after being little changed in April and increasing slightly in March. Prices are now rising at a moderate pace after being modest to moderate in April, but it is unclear how much tariff based cost increases will be passed on. Whatever pass
June 3, 2025 10:48 AM UTC
Trump’s natural instincts will likely see extra pressure applied on Europe in the coming weeks to commit to 5%, but we do not see existential threats from Trump. In the end, our baseline is that NATO will agree a “soft” aim of 5% (3.5% hard military spending and 1.5% infrastructure/cybersecu
June 2, 2025 7:42 AM UTC
• President Donald Trump increase in steel and aluminum tariffs from 25% to 50% is not just about boosting the steel and aluminum industry. It also a demonstration that Trump remains in control of tariffs and can aggressively change tariffs to increase negotiating leverage. It is a mess
May 30, 2025 9:12 AM UTC
Increasing taxes on dividends on U.S. equities and corporate bond coupons would alarm foreign investors and hurt the USD and U.S. equities, as it would amplifies foreign investors concerns that they are overweight U.S. assets and the USD. Starting a capital war with investors into the U.S. is
May 29, 2025 7:18 AM UTC
• The Trump administration will likely follow a multi-track response by appealing the judgement but also fast-tracking section 232 product tariffs for pharmaceuticals and semiconductors. The administration could also consider section 301 or 122 tariffs (the latter 15% for 150 days against c
May 28, 2025 7:04 PM UTC
FOMC minutes from May 7 may be a little dated as tariffs on China have subsequently been reduced significantly, but there is no suggestion in any subsequent Fed commentary that the Fed is no longer concerned over the risks that the minutes outline. All participants judged that it was appropriate to
May 28, 2025 7:35 AM UTC
• Though financial markets are debating the effects of the U.S. budget deficit trajectory on yields and how much global investors will reduce overweight U.S. exposure long-term, the critical question remains the scale of the economic slowdown and what it means for tactical asset allocation
May 23, 2025 4:32 PM UTC
The “Big Beautiful Bill” on fiscal policy passed by the House was costed by the Congressional Budget Office on May 20 and shows a significant boost to the budget deficit in the remainder of the current Trump presidential term. This is because tax cuts have been front loaded and spending cuts bac
May 16, 2025 11:42 PM UTC
Moody’s downgraded US debt to AA1 from AAA after Friday’s close. The decision appears due to continued lack of action on the budget deficit rather that being triggered by any specific event, and brings Moody’s into line with S and P and Fitch. However the timing is awkward for markets, with th
May 15, 2025 7:15 AM UTC
The alternative hard landing scenario in China has been reduced significantly with the trade truce with the U.S. However, China will still have to cope with a minimum 30% overall tariff, with only around a 10% reduction in the fentanyl tariff likely to be agreed in the coming months. Our baselin
May 14, 2025 1:14 PM UTC
Now that we have seen April’s non-farm payroll and CPI data, the underlying economic picture still looks quite healthy. Activity still seems to have respectable momentum despite a marginal decline in Q1 GDP, while inflation appears to be losing momentum with little pass through of tariffs yet. Unc
May 14, 2025 9:05 AM UTC
The U.S. will likely introduce a 25% tariff on pharmaceuticals, which will increase pressure on the EU and other European countries (e.g. Switzerland) and also delay serious negotiations close to the 90 day reciprocal tariff deadline on July 9, adding to pressure on Europe by deliberately prolonging
May 13, 2025 9:38 AM UTC
Though we had expected a U.S./China trade truce, the terms are more favorable to U.S. growth than we anticipated. Combined with the UK framework deal, we have revised down the probability of a U.S. recession from 35% to 20%. In turn we have revised up the end 2025 and end 2026 S&P500 forecasts t