Dominique Dwor-Frecaut
Summary April’s NFP do not tell us much about the new trade regime because the data was collected before the bulk of the tariffs were in effect. NFP were 177k, above consensus’ 138k. Migrant workers continued adding to labour supply as deportations are running below FY2024, but the long-term goals of immigration policy remain unclear. […]
Dominique Dwor-Frecaut
Summary The Fed can focus on its mandate now Chair Powell is no longer at risk of getting fired, which increases the chance of a rate cut. It is unclear the Fed still needs to wait for more information on the Trump administration policies because no matter what these turn out to be, their impact […]
Dominique Dwor-Frecaut
Summary Macro Hive’s Fed LLM Sentiment Index shows the Fed is turning more dovish, by contrast with earlier in the year when the Fed was noticeably more hawkish than the markets. This likely reflects three factors: Trump administration has turned the tables on the Fed. Benefits of the Fed’s ‘wait-and-see’ stance have become uncertain. Employment […]
Richard Jones
Summary US short-end yields have been wild this month, with prices rallying and sliding with every White House policy zigzag. The 2-yr US Treasury (UST) yield is now very near the middle of April’s MTD range (~3.65%/~3.95%). Technicals on US short-end futures contracts are neutral, very near the middle of the 30 (oversold)/70 (overbought) RSI […]
Dominique Dwor-Frecaut
Summary The Trump administration is ending the forbearance on student loans. Student debt is falling. College is too expensive! Still, debt repayments could increase by about 0.75ppt of disposable income. I expect consumption to fall but by less than the increase in debt service, largely because many households barely get by and are likely to […]
Dominique Dwor-Frecaut
Summary Rather than ‘an economic nuclear winter’ the endpoint for the US economic trajectory is likely a deal of sorts with trading partners. The US can get there with or without a recession. I see only a 20% chance of getting there without recession largely due to a lack of consensus among Trump administration officials. […]
Dominique Dwor-Frecaut
Summary March CPI was 20bp MoM lower than expected with large declines in used cars and core services ex housing pulling down the index. Trend inflation remains stable to upwards. Short-term Inflation expectations continue rising but long-term market-based expectations, which matter most to the Fed, remain stable. Cost pressures are about to increase with the […]
Dominique Dwor-Frecaut
Summary A 2025 recession is likely due to the extraordinary increase in tariffs and policy uncertainty, with the pause in tariffs implementation likely to move the onset to Q2 from Q1. The recession is likely to last about three quarters with unemployment increasing by about 2.5ppts. I expect the Fed to cut as the recession […]
Dominique Dwor-Frecaut
Summary NFPs were higher than expected though the trend remains unclear. Labour supply growth remained weak. Most measures indicate unchanged labour market utilization (i.e., full employment). Real wage growth had been accelerating but is about to slow due to tariffs-induced inflation acceleration. I am changing my Fed call to one 2025 cut due to the […]
Dominique Dwor-Frecaut
Summary Yesterday’s tariff announcement reduced policy uncertainty but was of such magnitude that it created new economic downside risk. The tariffs will lift inflation, though it is uncertain by how much and for how long. The tariffs will likely lead to a contraction in manufacturing output and employment, with an ambiguous impact on the trade […]
Dominique Dwor-Frecaut
Summary Because of the political costs associated with large interest payments, the Fed is biased towards holding a smaller balance sheet relative to the needs of its operating framework. Because of the interconnectedness of the money market segments, the Fed must provide liquidity to the entire money markets, not just banks. A broad measure of […]
Dominique Dwor-Frecaut
Summary The Fed remained on hold and kept two 2025 cuts in the SEP as I expected. Powell’s growth views were ambiguous as he appeared less pessimistic than the SEP. Powell’s base case is for the tariffs inflation impact to prove transitory, though he stressed uncertainty was unusually high. The FOMC policy consensus grew stronger […]
Antonio Del Favero, Dominique Dwor-Frecaut, Richard Jones
Summary Our base case is no major changes in the dots, economic projections, or during the presser. The first paragraph in the statement could be updated to reflect recent economic developments. We think the longer-run dot will increase marginally from 3.0% to 3.1%. Market Implications We expect some rates selloff and bear flattening, alongside equity […]
Dominique Dwor-Frecaut
Summary With the new USTR now fully in place, and with the Trump administration aware it needs more disciplined policy messaging, tariff policy is about to become more process driven. This could restore some private sector confidence and spending because the drama and chaos over tariff policies has exaggerated the importance of the manufacturing sector. […]
Dominique Dwor-Frecaut
Summary February CPI surprised on the downside but did not change my big picture view of inflation, stuck about 1ppt above the Fed’s 2% target. However, risk exists the Trump administration’s policies could raise costs and weaken demand, with uncertain inflation impact but a negative growth impact. Market Implications I keep my call for no […]
Dominique Dwor-Frecaut
Summary A surge in policy uncertainty is starting to undermine growth while inflation risks remain tilted to the upside. On the eve of the pre-meeting blackout, with the SPX already down 6%, Fed Chair Jerome Powell indicated a continuation of the Fed’s wait and see stance. Market Implications I still expect no cuts in 2025 […]
Dominique Dwor-Frecaut
Summary The surge in policy uncertainty has not impacted the labour market much yet. Nonfarm payrolls (NFP) were lower than expected for the second month in a row, but this could reflect data choppiness and residual seasonality. Labour supply growth remained weak. Most measures of labour market utilization indicate a still tight market. Nominal wage […]
Dominique Dwor-Frecaut
Summary President Donald Trump aims to reverse the decline in the income share of lower income Americans. If successful, this could create a macro regime change with higher growth and inflation as well as a steeper Phillips curve: The market consequences of the macro regime change include: Higher real yields. Ending US equity markets outperformance. […]
Dominique Dwor-Frecaut
Summary Yesterday’s swing in the Atlanta Fed Q1 GDP nowcast to -1.5% QoQ SAAR from 2.3% reflects a swing in imports caused by expectations of tariff increases. By contrast, the nowcast for final domestic demand growth remained positive, though well below actual Q4 GDP growth. The slowdown likely reflects higher consumer savings caused by concerns […]
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