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US Macro Analysissee more…

  1. FOMC: Scenario Analysis

    Antonio Del Favero, Dominique Dwor-Frecaut, Richard Jones

    Summary Our base case is no cut, but the Fed takes note of the greater downside risks to growth and signals it will remain well-positioned to address either leg of its mandate. Fed slows quantitative tightening (QT) to ease the funding strains emerging in the RP market. Despite low PCE and negative GDP, we think […]

  2. Labour Market Monitor: April’s NFP Reflects Old Trade Regime

    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. […]

  3. FOMC Preview: Fed to Turn Dovish

    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 […]

  1. Dom’s Quick Take: MH Fed LLM Signals Rising Risks of June Fed Cut

    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 […]

  2. End of Student Debt Forbearance to Add Downside Risks to Growth

    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 […]

  3. A Framework for Navigating Structural Uncertainty

    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. […]

Fed Monitor: 150bp Cuts to Start Mid-2025

Dominique Dwor-Frecaut

Summary A US recession is likely unless the Trump administration moves towards sustainable and predictable tariff policies. The tariffs will lift the price level by at least 1ppt while the long-term impact on inflation is uncertain. The Fed is likely to cut by about 150bp as the recession will reduce the long-term impact of tariffs […]

Inflation Monitor: Cost Pressures to Mount, Demand Pressures to Weaken

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 […]

  1. Change of Call: Fed to Cut 150bp Due to Recession

    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 […]

  2. Change of Call: One Fed Cut in 2025 as Tariffs to Hit Growth, Inflation

    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 […]

  3. Trump’s Tariffs Shock

    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 […]

Fed Balance Sheet Already Too Small?

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 […]

Dom’s Quick Take: Peak Tariff Anxiety Now?

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. […]

  1. Inflation Monitor: Higher Costs and Weaker Demand?

    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 […]

  2. Labour Market Monitor: Still Too Tight for Fed 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 […]

  3. The New Trump Trades

    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. […]

Quick Take: Freakish GDP Nowcast Does Not Signal Long-term Slowdown, Yet

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 […]

Growth at Greater Risks From Supply Shocks Than Tighter Financial Conditions

Dominique Dwor-Frecaut

Summary Net Fed tightening has not changed financial conditions much and growth remains well above trend. Strong consumption largely reflects the impact of the 2022-24 immigration surge and government-funded household deleveraging during the pandemic. Strong corporate investment reflects strong cash flow rather than increased leverage. The above suggests growth is more at risk from negative […]

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