US Economics

US Economics Weekly

2 February, 2018

Easing financial conditions pose a problem for the Fed

Despite long-term Treasury yields rising sharply this week to their highest level in four years, broader measures suggest that overall financial conditions have actually continued to loosen. Corporate bond spreads have fallen to levels not seen since 2007, banks are continuing to relax lending standards and the stock market remains close to a record high. Most notably, after the 7% depreciation in 2017, the dollar has already fallen by a further 3% in trade-weighted terms so far this year.

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