The official statement acknowledged that U.S. inflation was running below the 2% target, but Fed Chair Jerome Powell later described that inflation shortfall as “transitory” and expected to reverse. Powell standing…
If inflation runs persistently above or below 2 percent, then the Fed would be forced to adjust its policy stance to nudge it back towards target. If inflation’s deviation from target is only transitory, it means that it…
Under the Fed’s existing framework, its “symmetric” inflation target is not supposed to be backward-looking. Symmetry simply means that the Fed targets 2% inflation every year, allowing for an equal probability…
The rationale is straightforward: If the neutral rate turns out to be higher than expected and inflation starts to accelerate, central banks can always tighten monetary policy. In contrast, if the neutral rate is very low, the…
At first blush, the first quarter’s real 3.2% growth would seem to attack the notion that the Fed has already reined in the economy. However, there was much less to the GDP release than meets the eye, as it was propped up…
Our sector strategists recently examined the question of sector performance in an environment where the Fed is cutting rates. A Fed rate cut is not our base case view: leading indicators of inflation remain biased to the upside,…
Yesterday, the Fed dashed the hopes of traders betting on an interest rate cut this year. The FOMC is on pause for now, and it will not respond to what it perceives as a transitory inflation slowdown. The Fed reaction function…
The central bank tweaked some of its lending facilities to further loosen financial conditions. It also “clarified” its forward guidance by promising to keep both short- and long-term interest rates extremely low…
Highlights We continue to recommend overweighting Mexican local fixed-income markets, the peso and sovereign credit relative to their respective EM benchmarks. A new trade: Sell Mexican CDS / buy Brazilian and South African CDS.…