Inflation “transitory”, but Fed now projects rate hikes

The Fed continued to stick to its view that the surge in inflation "largely" reflects "transitory factors", but officials revised their inflation projections up significantly for this year and the median projection now shows two 25bp interest rate hikes in 2023. In his press conference, Chair Jerome Powell argued that the Fed was still “a ways off” from achieving the substantial further progress toward its dual mandate goals that would trigger a tapering of its monthly asset purchases.
Paul Ashworth Chief North America Economist
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US Data Response

ISM Manufacturing Index (Jul.)

The further small decline in the ISM manufacturing index in July probably has more to do with the continued drag from supply constraints than waning demand. The details did at least suggest that supplier delivery times and the accompanying upward pressure on prices may have peaked. But we suspect it will be a long time before supply constraints ease meaningfully.

2 August 2021

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The slightly disappointing second-quarter GDP data released this week and another dovish press conference from Chair Jerome Powell strengthen our belief that the Fed is unlikely to begin tapering its asset purchases until early next year.

30 July 2021

US Employment Report Preview

Payroll growth to remain elevated

With labour supply continuing to lag the recovery in demand, we estimate that growth in non-farm payrolls slowed to 650,000 in July.

 

29 July 2021

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US Data Response

GDP (Q1)

Buoyed by the two rounds of stimulus cheques sent out in the first three months of the year, first-quarter GDP growth accelerated to 6.4% annualised, driven by a massive 10.7% surge in consumption. That left the level of GDP less than 1% off its pre-pandemic peak. It will recapture that level in the second quarter and, with the pace of growth we expect, any remaining output gap should be eliminated before the end of this year.

29 April 2021

US Economics Update

Fed remains dovish despite strength of recovery

Although it took a more upbeat tone on the economic outlook and acknowledged that inflation has risen in its statement released after today’s FOMC meeting, the Fed offered no hints that it was considering slowing the pace of its asset purchases, let alone thinking about raising interest rates.

28 April 2021

US Data Response

Employment Report (Mar.)

The better than expected 916,000 rebound in non-farm payrolls in March still leaves employment 8.4 million below its pre-pandemic peak from just over a year ago but, with the vaccination program likely to reach critical mass within the next couple of months and the next round of fiscal stimulus providing a big boost, there is finally real light at the end of the tunnel.

2 April 2021
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