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Monetary Policy & Inflationsee more…

FOMC Preview: A September Risk Management Cut Comes Into View

Dominique Dwor-Frecaut

Summary Employment risks are rising due to weaker growth that itself reflects low private sector confidence and continued extreme policy uncertainty. Weak growth is containing US tariffs’ passthrough, but long-term inflation risks are increasing. Long-term market-based inflation expectations remain stable while survey-based expectations are falling. The real economy and financial markets suggest the Fed’s policy […]

  1. UK Labour Market – Unemployment Rate Rises on Participation, Details Still Bearish

    Henry Occleston

    Summary The release sustains UK bearishness. Vacancies dropped, PAYE employment continued declining, wage growth undershot MPR. The unemployment rate rising is largely immaterial – LFS is a non-credible data source, and it was driven by a jump in the participation rate. Our view remains that the labour market is loosening faster than the BoE expects. […]

  2. Stablecoins and US Treasuries: More Turbulence Than Lift?

    Dominique Dwor-Frecaut

    Summary Stablecoins (SCs) expansion is likely to accelerate with Congress’ adoption of the GENIUS Act, which will provide a much-needed regulatory framework. SCs are unlikely to reach a scale where they would displace traditional money as SCs are a niche means of payments and cannot pay interest. Medium term, traditional money is likely to be […]

  3. Upside Surprise in UK June CPI, BoE Will Be More Interested in Labour Market

    Henry Occleston

    Summary UK headline inflation ticked back up in headline and core and remained stable in services. This was a broad beat versus consensus and slightly above MPR expectations. Beats in food appear to be beef and dairy related. But we would not write this off as transitory given sector inflation has been rising consistently YoY […]

  1. Macro Consensus Challenger: June CPI Benign but 2026 Risks Rising

    Dominique Dwor-Frecaut

    Summary June core CPI was below expectations. Passthrough from tariffs to goods was stronger this time but there was no evidence of inflation contagion to non-tariffed goods or to services. Medical care prices (largely administered) drove a limited acceleration in services inflation. Nevertheless, the pre-tariff trend of goods inflation acceleration resumed while inflation pressures from […]

  2. Macro Consensus Challenger: Balanced Weaknesses in Labour Demand and Supply

    Dominique Dwor-Frecaut

    Summary NFPs were higher than expected but half of the increase came from the government sector, with private NFPs below expectations. June’s labour supply continued weakening following the end of the immigration surge. Labour demand and supply weaknesses roughly balanced out with the unemployment rate 12bp lower. Wage growth slowed further, which made for slower […]

  3. Are Equity and Bond Markets Both Wrong?

    Dominique Dwor-Frecaut

    Summary Equity and bond market pricing of the US economic outlook could only be consistent under the ‘Goldilocks’ economic conditions prevailing during 2022-24’s immigration surge. But immigration has collapsed, which is likely to cause ‘stagflation-lite’ economic conditions. Soft private sector demand due to weak confidence will dampen inflationary pressures in 2025. The fiscal stimulus Congress […]

Fed Likely to Look Through Oil Price Shock

Dominique Dwor-Frecaut

Summary The Middle East remains tense and hostilities could easily restart and cause an oil price shock. Because the US is a net energy exporter, but oil producers’ spending is limited, an oil price shock would likely see US income increase but US spending decrease, which would improve the external balance. Because of a tighter […]

BoE Review: Statement Slightly More Dovish, Expect August Cut

Henry Occleston

Summary The MPC voted for no change in bank rate (4.25%), as expected. Minimal statement changes included adding a clearer indication of ‘slack opening up’ in the UK economy. We still expect the BoE to cut again in August and cut to 3.5% this year. Market Implications We remain long SFIZ6 in our model portfolio, […]

  1. FOMC Review: Hints of September Cut

    Dominique Dwor-Frecaut

    Summary As expected, the Fed remained on hold and the 2025 dot showed two cuts. The FOMC economic assessment was unchanged and is more hawkish than recent data, which could reflect concerns the inflationary impact of tariffs is yet to come. The meeting has added to my conviction for a September cut as Macro Hive’s […]

  2. Dom’s Quick Take: New Indicator Highlights Recession Risks

    Dominique Dwor-Frecaut

    Summary The Richmond Fed has devised a recession indicator based on jobless claims that is more accurate and timelier than Sahm’s rule. Should continuing claims continue increasing at the pace of the past four weeks, the indicator would signal recession at end-October 2025. By contrast with 2008, this time a continued increase in claims would […]

  3. May Inflation to be Mixed, BoE to Pause but Expect More Cuts From August

    Henry Occleston

    Summary With no presser and no update to forecasts, the BoE’s policy announcement is unlikely to be eventful. While cracks continue growing in the UK economy, data has not derailed sufficiently enough for the BoE to change tack. We expect inflation to roughly align with May’s MPR: headline below consensus but core higher. We analyse […]

Dom’s Quick Take: 2025 Dot to Show Two Cuts

Dominique Dwor-Frecaut

Summary Following below-expectations CPI and above-expectations jobless claims, I now expect next week’s 2025 and 2026 dots to show two cuts each, from one and three cuts in my Fed preview. It is too early for the FOMC to form a view on the impact on the outlook of Israel’s most recent attack on Iran. […]

Macro Consensus Challenger: Inflation Keeps Surprising on Downside

Dominique Dwor-Frecaut

Summary May CPI was again below expectations. The print shows no sign of second-round effects. Non-tariffed goods and services prices were aligned with or below trend. Therefore, I keep my expectations that inflation will peak at end-2025 and slow thereafter, in line with consensus. Three scenarios would falsify my view: a worsening of the trade […]

  1. FOMC Preview: 2025 Dot to Show One Cut

    Dominique Dwor-Frecaut

    Summary Since May’s FOMC, soft data weaknesses have started transmitting to hard data and the impact of tariffs on inflation has been limited, though it is early days. FOMC members’ overall objective is to prevent a de-anchoring of long-term inflation expectations and a permanent inflation increase. The SEP is likely to still show a soft-landing […]

  2. Macro Consensus Challenger: Early US Labour Market Softening, Fed to Cut in September

    Dominique Dwor-Frecaut

    Summary May NFPs were higher than expected but employment growth is slowing once revisions are considered. Unemployment was unchanged based on poor quality household (HH) survey data. Other data from a variety of sources show the labour market has started loosening. This aligns with my expectations, so I still expect two-three Fed cuts in 2025. […]

  3. ECB Review: Hawkish Cut, but Do Not Rule Out Another Cut This Year Just Yet

    Henry Occleston

    Summary The ECB cut 25bp as expected. The presser was more hawkish, especially around comments that they are ‘in a good place’ after the cut. This and the updated dovish forecasts suggests room for the economy to outperform, further quashing need for another cut. However, we are wary that their assumptions on tariffs look optimistic. […]

Macro Consensus Is Inconsistent

Dominique Dwor-Frecaut

Summary The macro consensus assumes benign inflation and unemployment, which seems inconsistent with the large tariffs supply shock. The consensus seems overoptimistic on trade and fiscal policies, which carry downside growth risks. Weak growth will limit second-round effects from the tariffs, allowing the Fed to focus on employment weakness. The unemployment trajectory I expect suggests […]

BoC Review: July Cut Base Case, Assuming Inflation Behaves

Viresh Kanabar

Summary Governor Macklem executed a dovish hold during yesterday’s BoC meeting. Three themes emerged during the presser: Uncertainty is weighing on Canada’s economy. Inflation remains too high. A cut and a pause were discussed, with inflation data leading to a pause. Market Implications We believe the BoC will next cut its policy rate in July. […]

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