Over the past two years, disinflation in the price of goods, and, in some cases, outright deflation allowed the economy to avoid a recession and for unemployment to decline into what is widely acknowledged as full employment. But this relative price stability is now at risk with the prospect of 25% ... READ MORE >
Market minute: Soft economic landing at risk
The Federal Reserve is on the verge of achieving that rarest of economic feats: A soft landing. The rapid disinflation that the Fed has engineered over the past two years mirrors that of the 1990s—the last time the central bank achieved such a difficult feat. That disinflation set the stage for a ... READ MORE >
Market minute: Canadian dollar remains under duress
While net long positions on the U.S. dollar versus its Canadian counterpart are below the peak of last October, the possible onset of significant tariffs on Canadian imports into the U.S. has taken a toll on the Canadian dollar. Should higher tariffs on Canada announced by the United States take ... READ MORE >
Market minute: The ripple effect of higher European defense spending
The emergency defense summit in Paris on Monday on the eve of negotiations over the war in Ukraine strongly implies that a large increase in defense spending among European Union nations is coming. That outlay may be as large as $3.1 trillion over the next decade, Bloomberg reported. Any such move ... READ MORE >
Market minute: U.S. housing supply is not meeting demand
U.S. housing completions have declined from a cyclical high of 1.763 million annually last August to a recent low of 1.544 million. That decline is likely to continue and fall below 1.45 million given that homes under construction ended last year at 1.431 million. Although housing starts are a more ... READ MORE >
The new mercantilism: Tariffs and currency manipulation in an era of U.S.-China tensions
After decades of growing trade and current account imbalances in the United States, the new administration has set out to change this equation with nothing less than a rebalancing of the global economy. Today, a new mercantilism, rooted in tariffs and trade protection, is emerging. We define ... READ MORE >
Market minute: Clash of the titans to cause further currency manipulation
Trade War 2.0 between China and the United States will stimulate further currency manipulation out of China to partially offset the 10% tariffs on Chinese goods imposed by the new administration. Now, with China imposing $14 billion on trade taxes on goods, it is likely that a series of tit-for-tat ... READ MORE >
Market minute: Money markets signal an easing in 10-year yields
A look at the spread between the two-year and 10-year U.S. Treasury yields in comparison with the Treasury term premium implies room for further easing in long-term yields. Our forecast calls for the 10-year yield to average 4.5% this year, trading between 4.3% and 4.7% and testing 5%. Through Feb. 10, ... READ MORE >
Inflation accelerates in January amid concerns about rising expectations
Strong aggregate demand driven by job gains and rising real wages that in turn supported robust demand for services, rents and energy resulted in a 0.5% increase in the top-line consumer price index in January and a 0.4% advance in core inflation. A year-ago basis, the index increased by 3% and core ... READ MORE >
Market minute: The problem of sticky and stubborn inflation
The consumer price index for January, which will be released this morning, will most likely reaffirm that service sector inflation remains sticky and stubborn amid strong job and wage gains that are the primary drivers of aggregate demand. While housing inflation is easing, owners’ equivalent rent ... READ MORE >