Dominique Dwor-Frecaut
Summary In my view disinflation with strong equity market performance is likely to continue. A post-pandemic productivity pickup is translating into lower labour costs rather than into higher wages, which supports further disinflation but adds downside risks to growth. The income share of profits is continuing to rise, which is translating into rising equity market […]
Dominique Dwor-Frecaut
Summary I provide a short description (and abundant data evidence) of a strong disinflationary driver largely overlooked by consensus: the weakening of workers’ bargaining power, recently highlighted by two Fed economists. Together with tariffs stability and a weak residential market, it gives me conviction that inflation next year is likely to surprise on the downside […]
Dominique Dwor-Frecaut
Summary Governor Miran’s view on the 2% inflation target and the Fed’s operational framework could turn out more market moving than his call for six 2025 cuts. Market Implications I am still expecting two more 2025 cuts. Three Key topics In his first interview as Board Governor on Friday, Miran announced he would present a […]
Antonio Del Favero
Key Points We posted this preview ahead of the BoE meeting in the Bloomberg chat. The meeting went broadly as we expected. 1. BoE to leave rates at 4% with a hawkish 7-2 split (i.e., 8-1 is more likely than 7-1-1 or 7-3). Taylor will vote for a cut. Dhingra is the wildcard. The rest […]
Dominique Dwor-Frecaut
Summary As expected, the Fed cut 25bp, and against expectations added one cut to the 2025 dot. Chair Powell cited a shift in the balance of employment and inflation risks as the primary reason and characterised the cut as risk management. Powell did not commit to a policy path, reflecting the lack of clarity on […]
Dominique Dwor-Frecaut
Summary Actual US tariffs continue falling well below policy announcements, possibly because the Trump administration is quietly lowering them. Real wage growth has fallen by half as nominal wage growth is lagging the increase tariffs-induced inflation increase. Fed policy and administration wishes could be converging because data supports easier Fed policy, but ultra-loose Fed policy […]
Dominique Dwor-Frecaut
Summary August CPI roughly aligned with expectations. Core goods and supercore services were mixed, with some items seeing falling inflation and some rising inflation. OER inflation accelerated but this is more likely noise than signal as the residential market remains weak. Against a backdrop of stable inflation trends and stable long-term inflation expectations, a 50bp […]
Dominique Dwor-Frecaut
Summary Markets are currently pricing only 10% risk of a 50bp Fed cut next week. Before CPI, I think risks are near but below 50%. Recent data shows the labour market is weaker than earlier thought as well as rising downside employment risks. Overall, the labour market is in worse shape than a year ago […]
Dominique Dwor-Frecaut
Summary NFPs were much lower than expected but unemployment increased only marginally due to lower immigration and labour supply growth. The report indicates downside risks to employment. Despite much slower labour supply growth, wage growth continued slowing, which supports disinflation but is negative for growth. A 50bp September Fed cut is likely if the QCEW […]
Dominique Dwor-Frecaut
Summary Bottom-up and top-down analysis suggest the US economy is not accelerating, despite recently better data. This makes little difference to markets as equity markets are more driven by AI sentiment than by GDP growth. Even if I am wrong and growth is accelerating, the acceleration is unlikely to be strong enough to fundamentally change […]
Dominique Dwor-Frecaut
Summary The AI revolution’s footprint has so far been much bigger in markets than in the real economy. The Magnificent Seven’s extremely large capex spending has a high import component that limits its GDP impact. IT employment is gently falling but represents only about 2% of private employment. As AI adoption spreads to the whole […]
Dominique Dwor-Frecaut
Summary July CPI roughly aligned with expectations. The passthrough from US tariffs to goods was weaker than in June. Shelter costs were marginally higher but will slow further due to weakening rental and property markets. An acceleration in supercore inflation was driven by medical costs, perennial outperformers, and by a bunching of increases in other […]
Dominique Dwor-Frecaut
Summary US growth is likely to remain below 1.5% over the next year or so due to immigration collapse and consumer debt stabilisation. The Trump administration is likely to react through fiscal stimulus as monetary policy will likely remain beyond its reach. Because the growth slowdown is partly supply driven, a fiscal stimulus could bring […]
Dominique Dwor-Frecaut
Summary NFPs were lower than expected and previous months were massively revised down. Labour supply contracted further due to the decline in migrant workers and to native population aging. Unemployment aligned with expectations at 4.2%, up 0.1ppt relative to June and other indicators also indicated a weaker balance between labour demand and supply. Average hourly […]
Dominique Dwor-Frecaut
Summary The Fed did not cut as expected. Chair Powell prepared the ground for a September cut with a more positive inflation outlook and an acknowledgement of downside labour market risks. If unemployment remains within the current range, my base case, a 25bp cut is likely at September’s FOMC. Following the meeting, market pricing of […]
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 […]
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. […]
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 […]
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 […]
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