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US Economics Update

US Economics Update

Fed delivers 50bp hike and QT

With the Fed "highly attentive to inflation risks" it raised its policy rate by a bigger 50bp today, to between 0.75% and 1.00%, and launched its quantitative tightening; with the caps on the value of maturing principal allowed to run off each month set to quickly ramp up, from $47.5bn in June to $95bn in three months' time.

4 May 2022

US Economics Update

Labour market conditions remain tight

While the job openings and quits rates both edged up again in March, the bigger picture remains that labour market conditions have been stable over the past nine months or so, with few signs that shortages have begun to ease markedly, with the notable exception of the leisure & hospitality sector. That will maintain pressure on the Fed to raise rates aggressively until we see clearer signs that labour market shortages are beginning to ease.

3 May 2022

US Economics Update

Fed kicks off tightening cycle in hawkish mood

The Fed began its tightening cycle with a 25bp hike today and, despite the uncertainty caused by the war in Ukraine and China's efforts to contain the spread of the Omicron variant, officials look set to hike rates by an additional 25bp at each of the remaining six policy meetings this year, which would take the fed funds target range to between 1.75% and 2.00%.

16 March 2022
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US Economics Update

Recession risks still contained

The earlier spike in crude oil prices, slump in stock markets and the flattening of the Treasury yield curve have prompted fears that US economy is headed for a 1970s-style stagflation, but our recession tracking models suggest the risk of a downturn within the next 12 months remains low.

US Economics Update

Tentative easing in labour shortages

Both job openings and quits have fallen back slightly over the past several months, which suggests that wage growth and underlying inflationary pressures should soon stabilise.

US Economics Update

Higher oil prices not a huge risk to consumers

The surge in gasoline prices in recent days will only add to the drag on households purchasing power from fading stimulus and higher inflation over recent months. But with consumers able to cushion the blow in the near term by reducing their saving, we think oil prices would need to rise much further from here to seriously threaten the consumer recovery. For the broader economy, any hit to consumption should be mostly offset by greater investment in shale production.

8 March 2022

US Economics Update

Powell keeps the Fed’s options open

Chair (pro tempore) Jerome Powell indicated in his congressional testimony today that, with Russia's attacks on Ukraine roiling markets and creating additional uncertainty, he was inclined to support a 25bp hike later this month and that the Fed should “proceed cautiously” with plans to tighten policy this year.

US Economics Update

US economy insulated from Ukraine war

The war in Ukraine will prevent US inflation from falling as much as it otherwise would have in the coming months, but it will have little impact on the real economy, so we doubt it will stop the Fed.

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