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…
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.
Market expectations for inflation over next five years as of today:
Here’s a picture of several key macro indicators followed by the NBER BCDC, including today’s employment release and monthly GDP, and yesterday’s consumption and mfg/trade industry sales numbers. The recovery continues.
Figure 1: Headline CPI inflation, year-on-year (blue), and Core (brown), both in %. NBER defined recession dates peak-to-trough shaded gray. Source: BLS, NBER.
The value of the ruble has returned to pre-invasion levels [1]. But what I am more concerned about is exchange market pressure. And there, we are at sea.
Were wages flat during the Obama administration? Did they rise appreciably faster in the first three years of Trump (as asserted by this commentator)? 30 seconds of data retrieval reveals the answer is “no”.
What is the proportion of tariff increases passed through into domestic price increases for steel, in the wake of the Section 232 actions. Some of the oft cited estimates pertain to early on in the trade war. With the benefit of additional data, we have more evidence confirming that — unlike the tariffs imposed on most other goods — pass through is less for steel.
Today we are pleased to present a guest contribution written by Justin-Damien Guénette (Senior Economist), Jongrim Ha (Senior Economist), M. Ayhan Kose (Chief Economist and Director) and Franziska Ohnsorge (Manager) from the World Bank’s Prospects Group. The findings, interpretations, and conclusions expressed in this blog are entirely those of the authors. They do not necessarily represent the views of the World Bank, its Executive Directors, or the countries they represent.
What do simple 10yr-3mo and 10yr-2yr Treasury spreads imply about recession probabilities?