Dominique Dwor-Frecaut
Summary Base case: War triggers a 2026 recession, driven by a prolonged Strait of Hormuz (SOH) closure and underlying economic fragilities. Policy response: With long-term inflation expectations anchored, the Fed can cut four times in H2. Alternative: If the SOH reopens within a couple of months, the US likely avoids recession, and the Fed delivers […]
Dominique Dwor-Frecaut
Summary Expectations of strong 2026 fiscal impulse are likely to be disappointed for two reasons: Higher tax refunds will partly be offset by higher tariff revenues Tax refunds are more likely to be saved than spent. Market Implications I expect at least three 2026 Fed cuts, against markets pricing about two. Fiscal Easing, Not Fiscal […]
Dominique Dwor-Frecaut
Summary A key Trump trade—short bonds, long stocks—is performing worse this time than in 2017. This underperformance largely reflects the ongoing growth slowdown, driven by negative supply shocks (immigration restrictions, higher tariffs) and demand shocks (policy and AI-related uncertainty, fiscal consolidation) that were absent under Trump 1.0. Looking ahead, tariffs are unlikely to worsen, but […]
Dominique Dwor-Frecaut
Summary To be sure, the recovery is K-shaped: households in the top income quintile account for roughly 40% of consumption. But that is not new. The distribution of income, savings, and consumption has been remarkably stable over time—unlike consumer pessimism, which is a recent development. Consumer gloom likely reflects a triple blow: a softening labor […]
Dominique Dwor-Frecaut
Summary The fiscal stance has tightened since January, but this seems unlikely to last as some expenditure cuts are being litigated. Also, the increase in US tariff revenues has slowed considerably. Tariffs provide the Trump administration with additional policy flexibility, which it could use to implement stimulus if growth remains slow (my base case). Long […]
Henry Occleston
Summary The OBR downgraded real growth across the forecast horizon but upgraded nominal growth forecasts on the back of higher inflation ahead. Ahead of what could well be an election year in 2024, the UK Chancellor’s Autumn Statement provided a 2ppt cut to national insurance contributions. We expect next March’s budget to provide further backing […]
Sam van de Schootbrugge
A new National Bureau of Economic Research (NBER) working paper, co-authored by researchers from Stanford and Columbia, analyses the US banking system’s exposure to rising interest rates.
Sam van de Schootbrugge
A new NBER working paper investigates the correlation between US macroeconomic data releases and foreign stock markets.
Sam van de Schootbrugge
A new European Central Bank (ECB) working paper estimates the impact of rising real rates on euro area house prices.
Dominique Dwor-Frecaut
The message from 2022’s Jackson Hole Symposium was clear: taming inflation will be harder than markets expect.
Dominique Dwor-Frecaut
The Biden administration has unveiled debt forgiveness plans representing about 2.5% of GDP over 10 years. The forgiveness could raise consumption by 0.5-0.75pp of GDP in 2023 and worsen already exceptional resource pressures.
Sam van de Schootbrugge
Researchers from Harvard Business School and NYU Stern examine how US stimulus checks impacted stock prices during the pandemic.
Sam van de Schootbrugge
UK Chancellor Rishi Sunak surprised many with a larger-than-anticipated government spending stimulus in the Autumn Budget. This could...
John Tierney
Another year, another Congress, another debt ceiling crisis. Usually, these things get resolved after tense negotiations and...
Sam van de Schootbrugge
Although a lifeline for many, the fiscal splurge during the pandemic made 2020 the largest single-year rise in global debt since...
John Tierney
Congress faces two pressing deadlines in coming weeks. First is passing a continuing budget resolution to keep the government open...
Julius Probst, PhD
Japan has been stuck in a zero-interest rate environment since the 1990s. While most consider the country an anomaly, economists like Paul Krugman and Ben Bernanke warned...
Sam van de Schootbrugge
During recessions, labour turnover increases as struggling firms attempt to reduce costs. In theory, these workers get reallocated to more productive firms that survive because they have more adaptable business models...
Sam van de Schootbrugge
Many central banks entered the Covid-19 pandemic with their lowest ever policy rate going into a recession. And so, for arguably one of...
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