The announcement on Wednesday that Fitch Ratings had placed the United States AAA credit rating on “Rating Watch Negative” is the latest sign that the policy brinkmanship over raising the nation's debt ceiling is extracting a growing price on the U.S. economy and jeopardizing well-functioning ... READ MORE >
RSM US Financial Conditions Index: Debt ceiling standoff to cause volatility
U.S. financial conditions remain a drag on overall economic activity. Our composite RSM US Financial Conditions Index remained at 0.9 standard deviations below neutral on Friday, corresponding to higher levels of risk than would normally be priced into securities. As investors await a ... READ MORE >
About that recession: Resilience now, risks ahead
We have made the case for some time that the “R” word that best describes the American real economy is resilience, not recession. Despite elevated inflation and interest rates, as well as tightening financial conditions and softening demand for loans, the economy has chugged along, thanks ... READ MORE >
Inflation remains sticky in April, rising by 4.9% over a year ago
Strong demand for transportation and gasoline in April bolstered by rising incomes and excess savings showed that inflation, while easing, is likely to remain sticky for the foreseeable future despite falling to 4.9% in April from 9.1% last June. April’s increase in the consumer price index ... READ MORE >
What would happen if the government defaults on its debt?
Another debt ceiling crisis is approaching, and it is in no one’s best interest. Policy brinksmanship over lifting the debt ceiling and the threat of default it brings is increasing the cost of doing business and carries far more risk than is commonly acknowledged. At its core, the stand-off ... READ MORE >
Fed survey shows a notable decline in loan demand
Further evidence of tightened lending conditions and a potential credit crunch can be seen in the notable decline in demand for credit by large and middle market firms, a new survey of loan officers from the Federal Reserve shows. This decline will affect the real economy in the near term ... READ MORE >
Is a debt-ceiling crisis coming? Money markets are saying yes.
Risks around to the economic outlook linked to a looming debt-ceiling crisis have been in the market for some time. This pricing in of risk has become particularly apparent now that both Treasury Secretary Janet Yellen and the nonpartisan Congressional Budget Office have put Congress on ... READ MORE >
Hiring in U.S. remains robust in April as the jobless rate falls to 3.4%
We have made the case over the past few months that resilience rather than recession is a more apt description of the American economy. The net change in employment in the April jobs report of 253,000 reported by the Labor Department on Friday reflects that resilience. In addition, the ... READ MORE >
Fed hikes rate a quarter point while creating framework for a pause
The Federal Reserve increased its policy rate for the tenth consecutive time on Wednesday, pushing the federal funds rate to a range between 5% and 5.25%. The 25 basis-point increase was accompanied by changes in the Federal Open Market Committee’s statement that imply a possible pause at ... READ MORE >
Economic implications of further turmoil in the banking sector
The Federal Deposit Insurance Corporation seized First Republic Bank overnight and then sold a select portion of its assets and liabilities to JPMorgan as it imposed an orderly wind down of the troubled regional bank. The action should bolster confidence in the ability of the federal ... READ MORE >