Monetary Policy & Inflationsee more…

  1. Japan’s Virtuous Cycle: Progress on Wages, Consumption Lags

    Viresh Kanabar

    Summary The BoJ is hoping that loose financial conditions will promote the virtuous cycle where stronger wage growth leads to sustainably higher inflation. While progress has been made on the wage front, there is limited evidence that consumption is rising, or that underlying inflation will hold around 2%. Looking ahead, the impact of the income […]

  2. FOMC Review: Confidence Unchanged

    Dominique Dwor-Frecaut

    Summary Despite May’s lower CPI, the Federal Reserve (Fed)’s guidance was roughly unchanged from May. Cuts remain the base case scenario but only after the Fed has gained more confidence on disinflation. The dot plot showed only one 2024 cut, aligning with my expectations. Market Implications I still expect no cut in 2024 against the […]

  3. NFP Review: Bumper Payrolls Support Hawkish Fed

    Dominique Dwor-Frecaut

    Summary May’s NFP was much higher than expected and other indicators confirmed the strength of labour demand. NFP and household (HH) survey employment diverged further which likely reflects immigration undercounting. Labour market balance indicators were mixed. Unemployment rose and wage growth accelerated, which could reflect a skills mismatch. Overall, Friday’s data suggests continued strong consumption […]

  1. Ep. 219: Jason Furman on Inflation Persistence, Fed Policy and Debt Levels

    Bilal Hafeez

    Jason Furman is the Aetna Professor of the Practice of Economic Policy jointly at Harvard Kennedy School (HKS) and the Department of Economics at Harvard University. He is also non-resident senior fellow at the Peterson Institute for International Economics. 

  2. FOMC Preview: Fed Still Needs Better Inflation Data

    Dominique Dwor-Frecaut

    Summary I expect: The Fed to keep its easing bias but convey a shallower easing cycle. The 2024 median dot to show only one cut and long-term dot to increase. Powell to convey strong confidence in growth dynamism. Market Implications I expect the presser to surprise on the hawkish side and still expect no cut […]

  3. ECB Preview: Expect a 25bp Cut – Focus on September

    Henry Occleston

    Summary We expect the ECB will cut 25bp on Thursday, but more interesting will be their forecasts and subsequent actions. We expect little change to the forecasts, with the ECB looking through recent labour market strength but providing a modestly higher profile for medium-term inflation. Services and domestic inflation will remain key, particularly if goods […]

US Elections Monitor: Will the Guilty Verdict Impact Trump’s Electoral Prospects?

Dominique Dwor-Frecaut

Summary Early evidence suggests presidential candidate Donald Trump’s guilty verdict lowered his odds of victory but still left him in the lead. The policy debate is about to focus on immigration, which could lift market participants’ growth expectations. Market Implications I still expect the Fed to remain on hold until end-2024. Trump Guilty Verdict May […]

April PCE and Consumption Consistent With Strong Growth and Inflation

Dominique Dwor-Frecaut

Summary In line with expectations, April core PCE MoM was lower than March. But a breakdown by component as well as median price indices suggest no resumption of disinflation. While real income and consumption growth were lower than in March, underlying fundamentals suggest the trend remains robust. Market Implications I still expect no FFR cuts […]

  1. Why I Remain Positive on Growth

    Dominique Dwor-Frecaut

    Summary Federal Reserve (Fed) tightening cycles are necessary but not sufficient for recessions. The current tightening cycle, one of the strongest on record, is unlikely to cause recession or disinflation because of poor policy transmission and because the US economy is stuck in a high inflation regime. Risks to my view come mainly from lower […]

  2. Fed Monitor: Turning More Hawkish

    Dominique Dwor-Frecaut

    Summary The Fed has turned hawkish as it remains concerned over inflation and growth trends and is having doubts on the transmission of policy tightening to the economy. Current polling could also be pushing the Fed toward a more hawkish stance to maintain policy optionality. I expect the median dot in the June SEP to […]

  3. Ep. 217: Mustafa Chowdhury on Surging Wealth, Hidden Bond Buyers and Fed Mistakes

    Bilal Hafeez

    Mustafa is a rates guru and member of the research team at Macro Hive. Before this, Mustafa was the Head of Rates, FX, and Derivatives at Voya Investments, where he helped manage $40 billion of assets.

Ep. 216: Dominique Dwor-Frecaut on Inflation Persistence, Immigration Surge and Trump Effect

Bilal Hafeez

Dominique Dwor-Frecaut is the Chief US economist and macro strategist for Macro Hive and is based in Los Angeles. Before that, she worked at various hedge funds including Bridgewater.

CPI Review: Unchanged Fed Confidence

Dominique Dwor-Frecaut

Summary April core CPI at 29 bp MoM was in line with expectations of 0.3% MoM and well above the Fed’s target. The details show inflation trends are improving little: housing inflation remains stable and high, while supercore inflation is accelerating. April PPI and CPI suggest core PCE around 0.3%, inconsistent with the Fed’s end-2024 […]

  1. Fed Monitor: Data Shows Resilient Growth

    Dominique Dwor-Frecaut

    Summary The Fed is on hold but has not changed its policy outlook. Markets are overestimating the risks to growth from recent data. On current trends, core PCE is set to overshoot the Fed 2024 forecast, which suggests fewer 2024 cuts in the June dot plot than the three shown in the March plot. Market […]

  2. BoE React: Fly Me to the June

    Henry Occleston

    Summary The BoE struck a more dovish tone, with comments suggesting they are strongly considering cutting in June if the data allows. This remains our base case. Bailey strongly indicated that they expect to need to cut more than the market is pricing, but that they will attempt to cut hawkishly (i.e. keep market pricing […]

  3. Is Immigration Adding to Inflationary Pressures?

    Dominique Dwor-Frecaut

    Summary Numbers of undocumented, largely low skilled immigrants have surged since 2021. This has supported both aggregate supply through higher labour supply, and aggregate demand through higher consumption. While unusually low wage growth has accompanied the immigration surge, this has not prevented a stabilization of services inflation, possibly due to business pricing power and migrant […]

NFP Review: Negative Surprise Will Not Add to Fed Confidence

Dominique Dwor-Frecaut

Summary April NFPs were lower than expected but remained above the 2019 average. Labour supply increased on the back of unchanged participation and US-born workers. The labour market rebalanced further: the unemployment rate increased, and wage growth slowed; however, growth in the real wage bill, a proxy for household income, accelerated further. These data are […]

Ep. 214: Lindsay Politi on Higher Inflation Regime, Recession Risks and Debt Dynamics

Bilal Hafeez

Lindsay Politi is Head of Inflation Strategies at One River Asset Management. Lindsay began her career at Wellington Management in Boston where she was head of Global Inflation-linked Investments.

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