Nowcasts for tomorrow’s CPI print is 1.1% m/m (Cleveland Fed), and Bloomberg consensus is 1.2%. In contrast, core CPI nowcast is 0.52%, consensus at 0.5%. The large gap is in large part attributable to gasoline prices, which rose 20% in March (all grades), even though the CPI weight of gasoline is only 3.8%. What do gasoline prices look like in April? This will depend on oil prices.
10yr-3mo Term Spreads and Probit Model Recession Forecasts: Germany, UK, Canada vs. US
For the US, Germany, UK and Canada:
Has the Ten Year Treasury Yield Equaled the Average of Ex Post Future Short Rates Plus a Risk Premium?
And similarly for the Two Year Treasury?
Russian (External) Debt in Doubt
At 40% recovery rate, credit default swaps (CDSs) imply 100% probability of default. Ratings agencies have downgraded Russian debt.
Russia Drops the Policy Rate – What Does It Mean?
The ruble has stabilized at near pre-invasion levels, and the Central Bank of Russia drops the policy rate to 17%. What’s going on?
“High-frequency macroeconomic risk measures in the wake of the war in Ukraine”
In a VoxEU post by Laurent Ferrara, Matteo Mogliani, and Jean-Guillaume Sahuc today, applying a growth-at-risk (GaR) approach (Ferrara et al. 2022, ungated 2020 WP version) they estimate they downside risk to Euro area vs. US GDP q/q growth.
What to Make of the 10yr-2yr and 10yr-3mo Spreads
As is well known, the recession talk has surged in the wake of the (short-lived) inversion in the 10yr-2yr spread.
Recession in 2023?
From Folkerts-Landau and Hooper at Deutsche Bank, yesterday:
…inflation in the US and Europe has now reached levels that have forced the Fed and
the ECB to pivot their monetary policy stances dramatically. As a result, we now
expect the US economy to be in outright recession by late next year, and the EA
in a growth recession in 2024…
Ten year-two year Spreads around the World
There’s been a lot of commentary regarding the inversion of the US yield curve, specifically a negative 10yr-2yr spread. Here’s a graph depicting 10yr-2yr spreads (aka “2s10s”) for several economies.
Inflation Expectations and Forecasts
Market expectations for inflation over next five years as of today: