Recent Federal Reserve communications have turned more hawkish, reflecting concern that persistent supply-driven price pressures could begin to feed into inflation expectations. But unlike in prior cycles, today’s environment is not defined by supply shocks alone.
In the past year, new models from industry leaders have continued to boost AI’s capabilities. According to various capabilities tests, Anthropic’s Mythos model has leapfrogged other AI models – including in the ability to thwart or support cyberattacks.
Something unusual is happening with U.S. inflation data. While the core Consumer Price Index (CPI) has looked relatively cool recently, core Personal Consumption Expenditures (PCE) inflation has risen sharply.
Markets and observers weren’t surprised when the Federal Reserve held its policy rate steady at the April meeting. More notable, in our view, were the three dissents by voting participants who did not support keeping the implicit easing bias in the policy statement’s forward guidance language.
Even in the event that the Middle East conflict eases and shipping resumes as usual through the Strait of Hormuz, it would likely take time for the global economy to normalize after one of the largest oil supply disruptions in decades.
Late last year, the Federal Reserve ended its latest quantitative tightening (QT) program: the process by which it shrinks its balance sheet by selling securities or letting them mature without reinvestment.
U.S. headline employment rebounded strongly in March, posting the largest monthly gain since late 2024. The jobs rebound, which was broad-based across industries, was a welcome sign after February’s data showed a sharp decline not usually seen outside of recessions.
In a world of intensified uncertainty and dispersion, investing becomes less about forecasting and more about favoring more liquid, high quality assets that can be resilient across a variety of scenarios.
The Federal Reserve held the policy rate steady in March at 3.5%–3.75%, a widely expected outcome as policymakers navigated an unusually complex macro backdrop.
The military conflict in Iran and the Middle East is curtailing the global flow of oil and natural gas. This adds notable pressure to energy prices and the near-term inflation outlook, while also raising questions about countries’ reliance on energy imports and their economic resilience.
The U.S. Supreme Court on Friday invalidated tariffs that President Donald Trump had imposed under the 1977 International Emergency Economic Powers Act (IEEPA). Most of the administration’s 2025 tariffs will therefore be rolled back, and importers should eventually receive refunds.
In recent editions of Macro Signposts, we’ve emphasized how U.S. policy changes coinciding with the emergence of a new general-purpose technology (AI) may be accelerating adoption and diffusion of that technology – while also driving economic adjustments.
Amid a rush of domestic and foreign policy developments that have rattled markets – including the potential for another U.S. government shutdown – the Federal Reserve held steady on U.S. monetary policy.
Last week in our latest Cyclical Outlook, “Compounding Opportunity,” we argued that beneath the economy’s broad resilience lies a stark divergence. U.S. policy pivots combined with the surge in adoption of AI technology have created winners and losers.
Following strong 2025 returns, high quality fixed income continues to offer attractive yields and global diversification at a time of stretched equity valuations and tight credit spreads.
Macro Signposts highlights takeaways from the data analysis conducted by our team of economists and other experts.
The Federal Reserve delivered a widely expected 25-basis-point (bp) rate cut in December, then signaled a more data-dependent path ahead. Barring an economic shock, we probably won’t see another rate cut until the second half of next year.
This technology is moving quickly, with most businesses only in the early stages of understanding its capabilities. Whether and how fast AI can unlock new, transformative, lucrative idea generation or unleash a force in the U.S. economy similar to the “China shock” – the period in the early 2000s when outsourcing shrunk the U.S. manufacturing base and structurally changed the U.S. labor market – is yet to be seen.
The ongoing U.S. government shutdown has policymakers – and investors – operating without much of the timely official data that usually inform their decisions. This could have a tangible impact on Federal Reserve policy in particular.
China’s ability to sustain fairly robust economic growth despite a massive property sector downturn is now facing new tests as global trade barriers rise, and domestic demand shows fresh signs of weakness.
The Federal Reserve on Wednesday announced a widely anticipated 25-basis-point (bp) rate cut, bringing the federal funds target range to 3.75%–4.00%. With markets priced for this move and the Fed operating in a data vacuum due to the U.S. government shutdown, the rate cut and modest statement changes were largely uneventful.
The recent high-profile bankruptcies and the timing of their collapse are consistent with this changing macro backdrop, although these cases were also allegedly exacerbated by inconsistencies in collateral accounting and pledges.
Locking in attractive bond yields can support long-term returns, especially as central banks cut interest rates and tariff effects pose risk to global economic growth and inflation.
The Federal Reserve resumed its rate-cutting cycle at the September meeting, lowering its policy rate by 25 basis points (bps) to a range of 4%–4.25%, after being on hold since its previous cut in December. The Fed also signaled a less restrictive stance to come amid mounting labor m
Fed officials remain patient, likely awaiting hard evidence of a weaker U.S. labor market before considering rate cuts.
Although President Trump has said he has no intention of firing Fed Chair Powell, the Trump administration may be testing the laws underpinning Fed independence.
U.S. trade policy has evolved significantly in a matter of weeks.
On 2 April, the Trump administration announced sweeping tariffs that were more aggressive than many had expected. Then on 9 April, the administration announced a 90-day pause on most of the new country-specific “reciprocal tariffs.”
The world has entered a period of geopolitical uncertainty, with the U.S. now at the center of the storm.
At their March meeting, Federal Reserve officials left the policy rate unchanged at 4.25%–4.5% and signaled further patience on rate cuts as they navigate greater uncertainty about the economic outlook.
Amid an unsettled global economic outlook and elevated equity valuations, bond markets present attractive yields and important diversification benefits.
Macroeconomic uncertainties prompted the Federal Reserve to signal a slower pace of policy rate cuts in 2025 and beyond.
In a week with a U.S. presidential election and market volatility, the Federal Reserve cut its policy rate 25 basis points (bps) as expected. Amid this noise and the generally positive messages from recent macro data, Fed Chair Jerome Powell emphasized that downside economic risks had decreased, but the policy rate remains above neutral, suggesting that gradual cuts are still likely to come over time.
In the wake of pandemic shocks, economies appear more “normal” than at any time since 2019. Yet policy rates remain elevated.
We believe the Fed is on a path to continue to cut rates over the next several meetings to realign monetary policy with a now more “normal” U.S. economy.
The central bank’s latest policy statement and Chair Jerome Powell’s remarks suggest that an initial interest rate cut could come as soon as September.
A second straight month of encouraging U.S. core CPI data supports an initial Federal Reserve rate cut as early as September.
Good news on U.S. inflation in May did not sway the Federal Reserve to signal interest rate cuts could come sooner.
April’s U.S. inflation report likely offers some comfort to Federal Reserve officials, but rate cuts are unlikely until we see a more substantial deceleration in inflation.
Despite the reacceleration of inflation and enduring labor market strength, the Fed remains focused on downside risks.
The March U.S. inflation report and other macro data will likely prompt a change in the Federal Reserve’s trajectory in 2024.
The global investment landscape is set to be transformed in the months ahead as the trajectories of major economies diverge more noticeably.
Federal Reserve officials appear locked in for multiple rate cuts this year, despite inflation reaccelerating – raising questions about the speed and timing of this easing cycle.
The Federal Reserve sees progress on inflation, but wants more certainty before it’s prepared to lower the policy rate.
The market anticipates a swift shift in the Fed cycle.
U.S. inflation cooled more than expected, and bond markets rallied, but the Fed is likely to remain in a long pause.
Tighter financial conditions prompted Federal Reserve officials to take a step back from data dependence, and suggest a higher bar for future hikes.
The latest inflation report raises the odds of further Federal Reserve action.
Our September Cyclical Forum was the first to be held in London, where the economic situation today reflects what’s happening around the world.
