FOMC Minutes from November 7 - Few hawkish signals despite stronger than expected data

November 26, 2024 8:00 PM UTC

FOMC minutes from November 7 show agreement that almost all participants judged risks to their dual mandate objectives of maximum employment and price stability to be roughly in balance and almost all backed the decision to ease by 25bps at the meeting, a more moderate move than the 50bps move that

U.S. Equities: Exceptionalism v Valuations

November 20, 2024 10:05 AM UTC

Bottom Line: Momentum towards further deregulation, tech optimism, and the prospect of aggressive tax cuts could help the U.S. equity market in H1 2025 before the fear of higher yields and Fed Funds hurts in H2.  6100 could be seen H1 2025, before a softening to 5850 for end 2025 S&P500.   We see

U.S.-Gilt Yields and Fed v BOE policy

November 19, 2024 10:07 AM UTC

We see scope for 10yr UK yields to diverge from the U.S. despite our new forecast of rising U.S. Treasury yields (here).  We feel that the BOE will ease by more than the Fed in 2025 and ease selectively in 2026 before and after our forecast of Fed Funds hikes.  Meanwhile, the UK fiscal stance is l

U.S.-Germany Yield Decoupling

November 18, 2024 9:25 AM UTC

We see scope for 10yr German Bund yields to remain close to current levels in the next 1-2 years, despite our new forecast of rising U.S. Treasury yields (here[MG(1] ).  A weak economic recovery; fiscal consolidation rather than easing in the U.S. and less underlying inflation pressures should all

U.S. Yield Curve Steepens Then Flattening on 2026 Fed Tightening?

November 15, 2024 10:14 AM UTC

We see 10-2yr U.S. Treasury yield curve steepening in 2025, as the Fed keeps easing to 3.75% but the long-end is worried about medium-term issuance and the budget deficit trajectory being excessive.  A moderate Fed tightening cycle in 2026 to curtail inflation from fiscal stimulus/tariffs should th

China Data: Mixed Data Backs More Stimulus

November 15, 2024 7:42 AM UTC

China October data is mixed with a bounce in retail sales helped by government trade ins and a holiday, but industrial production and housing construction disappointing.  This all argues for further fiscal stimulus.  However, given our view that some tariff increases against China by the U.S will

U.S. Tariffs on China: How and When?

November 13, 2024 9:55 AM UTC

The U.S. can put pressure on other countries by starting tariffs at a more moderate scale and country and industry specific and then credibly threatening to increase and broaden tariffs as it did in 2018-19 to get trade concessions from other countries.  This also reduce the scale of the adverse in

U.S. Fed's Kashkari - Could pause if prices surpirse to upside

November 12, 2024 7:46 PM UTC

Fed SLOOS on Bank Lending shows weaker demand for C+I loans

November 12, 2024 7:32 PM UTC

After showing an improved tone in Q3, the Fed’s Q4 Senior Loan Officer Opinion Survey of bank lending practices is mixed, with demand for commercial and industrial loans taking a step back. This suggests that strength in business investment, in particular equipment, which supported Q2 and Q3 GDP g

U.S. Economic Outlook under Trump

November 11, 2024 7:23 PM UTC

Uncertainty over how the U.S. election results will impact the economic outlook remains very high, but the evidence at present suggests that incoming President Donald Trump, assuming Republican control of the House is confirmed, will attempt to implement a substantial part of his campaign promises.

FOMC Eases by 25bps. We Now Expect 100bps More by Mid-2025 Before Renewed Tightening in 2026

November 7, 2024 8:38 PM UTC

The FOMC eased rates by 25bps as expected with a statement that avoided making any further dovish signals beyond what were given on September 18. In his press conference Chairman Jerome Powell left his options open for December when the decision will be data-dependent. On balance we still lean towar

U.S. Fed's Powell - Leaves options open for December

November 7, 2024 7:47 PM UTC

FOMC eases by 25bps, statement avoids dovish hints

November 7, 2024 7:22 PM UTC

The FOMC has eased by 25bps as expected and the statement looks fairly similar to that released on September 18, when rates were cut by 50bps. However, changes in the statement suggest that the Fed  has not seen any further reasons for dovishness since its September 18 meeting.

U.S. Election – Initial Thoughts

November 6, 2024 6:54 AM UTC

A Trump victory is now widely expected with results so far and has prompted knee jerk reaction in markets with U.S. Treasury yields and USD higher.  Policy uncertainty is high over tariffs, though the 2017 tax cuts will likely be renewed with some additional tax cuts elsewhere -- House race is tigh

U.S. Debt Divergence

November 5, 2024 1:47 PM UTC

Household debt/GDP has fallen noticeably since the GFC to largely counterbalance the rise in government debt/GDP.  However, a surge in household borrowing for consumption with Fed easing is unlikely, as the overall resilience on consumption hides buoyance among wealthy households and a struggle/low

FOMC Preview for November 7: A 25bps Easing, Outlook Unclear

November 1, 2024 3:33 PM UTC

We expect a 25bps FOMC easing on November 7 to a 4.5% to 4.75% range. With the dots from the September 18 meeting relatively evenly split between one and two more 25bps easings this year and data since September 18 on balance being relatively firm the debate is likely to be between no change and a 2

Election and U.S. Equities

October 31, 2024 10:30 AM UTC

The multi week reaction will likely swing on the narrow equity market focus of winners and losers and an assessment that a Trump win would be better than Harris for the U.S. equity market.  However, multi quarter the actual implementation of policies can spillover to impact the corporate earnings o

U.S. Election Scenarios and Post-Election Policy Risks

October 30, 2024 8:14 AM UTC

The U.S. election remains very close though a win for former President Donald Trump appears slightly more likely than one for Vice President Kamala Harris. The race for control of the House is also close, though here a Democrat majority looks marginally more likely. For the Senate, a Republican majo

U.S. Government Debt and Deficit – How Much Does it Matter?

October 25, 2024 9:55 AM UTC

Post-election U.S. fiscal policy can still cause stress in the U.S. Treasury market given the unsustainable U.S. budget deficit and the high risk of a rating agency downgrade in H1 2025.  However, 10yr U.S. Treasury yields above 4% now have a buffer and the prospect for Fed policy is also important

U.S. Fed's Hammack - Inflation improved, not saying mission accomplished

October 24, 2024 1:39 PM UTC

The incoming Cleveland Fed President, Beth Hammack like her predecessor Lorretta Mester, does not appear to be a dove.

U.S. Fed Beige Book Summary - Activity still subdued, inflationary pressures easing

October 23, 2024 6:10 PM UTC

The latest Fed Beige Book maintains the slower activity picture seen in the last report on September 4, while inflationary pressure appears to be easing. 

2yr Treasury Yields and A Mature Fed Easing Cycle

October 22, 2024 1:17 PM UTC

The outlook for 2yr yields is still dominated by the scale of expected Fed cuts and this remains fluid and most influenced by whether data continues to show momentum or whether the soft v hard landing debate reignites.  However, other financial markets should also watch how expectations of the matu

U.S. Fed's Bostic - No rush to get rates to neutral

October 18, 2024 5:45 PM UTC

Fed's Bostic has been taking a more cautious approach to easing since the strong September non-farm payroll was released. 

U.S. House Race Becoming Closer

October 16, 2024 10:00 AM UTC

The probability of a Republican clean sweep has jumped to a 25% probability, which could see a future President Trump go beyond renewing 2017 lapsing tax cuts.  It could also increase the odds of tariffs being increased to fund extra tax cuts!  This would likely curtail the Fed easing cycle and pu

U.S. Fed's Waller - Recent data suggests proceeding with more caution on rate cuts

October 14, 2024 7:25 PM UTC

Recent data suggests proceeding with more caution on rate cuts -- Fed Waller.

U.S. Fed's Bostic - Open to rates pause in November

October 10, 2024 6:33 PM UTC

FOMC Minutes from September 18 - Agreement on the economy, some debate on the decision

October 9, 2024 7:04 PM UTC

FOMC minutes from September 18 generated little response from the markets. A substantial majority favored the 50bps easing that was delivered though some would have preferred a 25bps move and a few others indicated they could support such a decision, though there was only one dissenting voter, Gover

U.S. Fed's Logan -Favors more gradual path for rates

October 9, 2024 1:53 PM UTC

U.S. Fed's Bostic - Risk economy is too strong

October 8, 2024 5:23 PM UTC

U.S. Fiscal Policy Post-Election: Temporary Fiscal Stress Rather Than a Crisis

October 8, 2024 9:30 AM UTC

We remain concerned that temporary fiscal stress will be evident in H1 2025, as rating agencies worry over the deficit/debt and interest rate trajectory that is unlikely to improve under either president.  This leaves an event risk of a ratings downgrade from one of the major agencies, given that t

U.S. Fed's Kashkari - No change in tone after strong payroll

October 7, 2024 6:22 PM UTC

U.S. Fed's Goolsbee - Jobs report superb, inflation might undershoot target

October 4, 2024 2:21 PM UTC

U.S. Fed's Goolsbee - Need rates down by a lot over next 12 months

October 3, 2024 5:31 PM UTC

FOMC Minutes Preview and Data Outlook Before the Next Meeting

October 2, 2024 5:52 PM UTC

After a less than dovish speech from Fed Chairman Jerome Powell to the NABE on Monday, it is likely that the minutes from the September 18 meeting due on October 9 will show a similar tone. However the next FOMC decision on November 7 will be data-dependent, and the minutes may highlight the signifi

U.S. Fed's Barkin - Too early to declare victory over inflation

October 2, 2024 4:23 PM UTC

Powell suggests FOMC not in a hurry to get rates to neutral

September 30, 2024 7:07 PM UTC

The latest speech given by Fed Chairman Jerome Powell to the NABE was not seen as dovish, suggesting the labor market is roughly where the Fed wants and easing is designed to keep it that way. In the Q+A he went on to see GDP revisions as having reduced downside risk, and suggested the Fed is not in

Israel/Hezbollah Scenarios

September 30, 2024 9:26 AM UTC

The most likely scenarios between Israel and Hezbollah are Israel/Hezbollah intermittent attacks/counterattacks (40%) or significant ground invasion Southern Lebanon (45%).  Both would be difficult in human terms and raise geopolitical tensions, but are unlikely to cause a lasting impact on global

EM FX Outlook: Fed Easing Helps but Divergent Trends

September 26, 2024 8:00 AM UTC

  USD strength is ebbing across the board, which provides a positive force for most EM currencies on a spot basis.  However, where inflation differentials are large, the downward pressure will remain in 2025 e.g. Turkish Lira (TRY).  Where inflation differentials are modest against the U.S., but

DM Rates Outlook: Rate Cuts Arrive Except Japan

September 24, 2024 9:00 AM UTC

•    For U.S. Treasuries, we see 2yr yields coming down further on our baseline soft landing view, as the Fed moves consistently to a 3.00-3.25% Fed Funds rate. However, with considerable Fed easing already discounted, 2yr yield decline should be modest and 2yr yields should bottom mid-2025. 1

U.S. Fed's Goolsbee - Must stay ahead of labor market weakness

September 23, 2024 2:39 PM UTC