Dominique Dwor-Frecaut
Summary A key driver of disinflation has been unit labour costs (ULC, i.e., wage costs per unit of output). The ULC growth slowdown largely reflects accelerating productivity growth. Fast productivity growth seems more likely to reflect the recovery and unusual output volatility than a trend shift. Therefore, productivity growth normalization over the next few quarters […]
Dominique Dwor-Frecaut
Summary IT capex shows the internet revolution has been ongoing since the 1990s. Yet the macro data shows no obvious impact on productivity. This could reflect measurement issues and a falling labour income share that has made for sluggish demand growth and inflation. Investors have still benefitted from the IT revolution through high profits and […]
Bilal Hafeez
David Dredge is the Chief Investment Officer of Convex Strategies, which is an agnostic value investor in volatility. David has over 30 years experience managing risk across global markets.
Dominique Dwor-Frecaut
Summary As I expected, the Federal Reserve (Fed) stuck to its narrative of continued but slower disinflation and kept three cuts in 2024. Fed Chair Jerome Powell also made it clear the Fed would not attempt to cap growth to accelerate disinflation. Powell also indicated a quantitative tightening (QT) taper was likely to start soon. […]
Bilal Hafeez
We have been building a series of AI models that interpret central bank speeches. Unlike many existing models, ours use the full capabilities of ChatGPT (rather than older BERT models), and we go beyond analysing just sentences. It is still a work-in-progress, but here are three takes on yesterday’s Powell presser: Powell’s remarks and Q&A […]
Dominique Dwor-Frecaut
Summary The Federal Reserve (Fed) is likely to stay on hold and keep three 2024 cuts. This is because recent data indicates that January was a one-off inflation increase not the start of an upward trend. The Fed could lift its growth forecast but this would not impact the Federal Funds Rate (FFR) trajectory as […]
Dominique Dwor-Frecaut
Summary The ongoing residential investment recovery is too small to discernibly impact housing supply and cap housing inflation. Yet it is adding to aggregate demand and could create resource pressures. The risks are finely balanced. On one hand, the US housing shortage supports a strong residential recovery. On the other, Fed support has been much […]
Dominique Dwor-Frecaut
Summary Business spending generates household income and spending and, in turn, more business spending. A very low savings rate on the household side and the Biden administration’s industrial policies on the business side have turbocharged this positive feedback loop. So far, the turbo economy has not caused overheating, largely due to high profits and a […]
Bilal Hafeez
Claudia Sahm is a well-known, highly regarded, Washington-based expert on monetary and fiscal policy and forecasting. She has advised decision-makers at the Federal Reserve, White House, and Congress.
Dominique Dwor-Frecaut
Summary Low unemployment suggests the ongoing expansion could be more mature than its duration alone suggests. Continued, if slower, disinflation (i.e., no recession) remains my base case for 2024. However, Donald Trump winning the election could lead to inflationary policies, Federal Reserve (Fed) tightening, and recession in 2025-26. Under more conventional macro policies, the expansion […]
Dominique Dwor-Frecaut
Summary The US budget deficit is likely to narrow in FY2024, but this reflects tax payments postponed in FY2023. Overall, the FY2024 fiscal stance will likely remain loose. Loose fiscal policy need not compromise disinflation if it remains offset by a large excess of private sector savings over investment. As I expected in March 2023, […]
Bilal Hafeez
Alberto Gallo is Chief Investment Officer and Co-founder at Andromeda Capital Management. Prior to that, Alberto initiated and ran the Global Credit Opportunities fund at Algebris Investments.
Matthew Tibble
Summary The Fed has r-star around 0.5% in real terms, but markets are pricing it around 2%. We think this could be a return to the pre-GFC ‘normal’. US disinflation could be entering its ‘last mile’ phase, implying slower price increases ahead. Asian trade data corroborates the recent pick-up in global manufacturing, but a lack […]
Dominique Dwor-Frecaut
Summary The precedent of the 1980s and 1990s suggests there is a slower ‘last mile’ phase of the disinflation process. We could be about to enter this last mile – that is, disinflation could be about to slow. This time, however, the last mile could still be faster than during the 1990s because of lower […]
Dominique Dwor-Frecaut
Summary The Federal Reserve (Fed) moved to an easing bias, but Fed Chair Jerome Powell ruled out a March increase, largely because he has less confidence about disinflation and is less concerned by inflation undershooting than I expected. A March cut could still happen if the economy weakened markedly or New York Community Bank’s difficulties […]
Dominique Dwor-Frecaut
Summary Since December’s FOMC, growth and inflation have been below or in line with the SEP, with FOMC members expressing a wide range of views on the timing of cuts. I expect the statement to prepare markets for a March cut by removing the reference to policy firming and conveying greater confidence that inflation is […]
Bilal Hafeez
Dominique Dwor-Frecaut is the Chief US economist and macro strategist for Macro Hive and is based in Los Angeles.
Dominique Dwor-Frecaut
Summary A second Trump administration would likely widen the budget deficit, end immigration, and raise tariffs further. Unlike the first Trump administration, a second administration would inherit an economy with strong resource pressures, and these policies could therefore raise inflation. As a result, the Federal Reserve (Fed) may have to tighten policy. Market Implications Contrasting […]
Matthew Tibble
Summary Two factors support our bullish USD/JPY call: weak Q1 seasonals for JPY, and Japan’s cyclical downturn. China faces a supply-demand imbalance preventing inflation from returning to positive territory. UK inflation remains below BoE forecasts despite the recent beat. Equities are trading at historically high P/E valuations, which could depress returns in 2024. Market Implications […]
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