No plan survives first contact with the enemy. Or bust banks
Kieran Clancy (U.S. Economist)U.S.
- The Fed is watching and waiting to see how much damage will be done by tightening credit…
- …We expect a substantial hit, but the Fed is still likely to hike again in May, and won’t be easing by July.
- New home sales likely rose again in February, but prices are falling as developers try to cut inventory.
Ian Shepherdson (Chief Economist and Founder)U.S.
- We expect a 25bp rate hike today, and the Fed likely will raise its terminal rate forecast by at least 25bp.
- Chair Powell will acknowledge banking risks, but argue that the threat is contained.
- The Fed’s new forecast will show faster growth and higher inflation, explaining the higher rate profile.
Ian Shepherdson (Chief Economist and Founder)U.S.
A dramatic improvement in affordability is still needed before sales can recover.
Kieran Clancy (U.S. Economist)U.S.
The Banking Crisis Is A Deflationary Event....Don't Be Distracted By The Fed's Balance Sheet
Ian Shepherdson (Chief Economist and Founder)U.S.
- Homebase data suggest March payrolls will rise by about 250K; too fast for the Fed.
- Slower gains are coming in the second quarter as weather boosts fade and credit tightens.
- Existing home sales likely soared in February, but the rebound does not mark a sustained recovery.
Ian Shepherdson (Chief Economist and Founder)U.S.
Sentiment dragged lower by banking chaos; inflation expectations continue to fall.
Kieran Clancy (U.S. Economist)U.S.
Upside surprise in manufacturing output is misleading; the near-term outlook remains grim.
Kieran Clancy (U.S. Economist)U.S.
- The banking crisis will trigger a huge expansion of the Fed’s balance sheet, but banks will not lend more.
- Credit standards are likely to tighten further; businesses will feel the squeeze most.
- Manufacturing is in trouble, despite recent gains in output; will the China rebound come to the rescue?
Ian Shepherdson (Chief Economist and Founder)U.S.
- The leap in January housing starts is noise, not signal; a real recovery is some way off.
- February manufacturing output likely reversed about half the January leap, but the trend is falling.
- Consumers’ inflation expectations look primed to fall in the wake of slowing food and energy inflation.
Ian Shepherdson (Chief Economist and Founder)U.S.
Weather hit to claims reverses; Philly Fed is much weakter than it looks
Kieran Clancy (U.S. Economist)U.S.
Don't be fooled by the February bounce; a sustained recovery in housing construction is still a long way off.
Kieran Clancy (U.S. Economist)U.S.
- If the Credit Suisse meltdown doesn’t scare the Fed, the drop in Treasury liquidity should.
- The potential cost of skipping a rate hike next week is much less than the cost of damaging the system.
- Q1 consumption looks to be headed for a 2% gain; the downshift in core PPI inflation is back on track.
Ian Shepherdson (Chief Economist and Founder)U.S.
The recovery in the NAHB index will soon hit the buffers.
Kieran Clancy (U.S. Economist)U.S.
PPI disinflation is back on track; no manufacturing bounce from China, yet.
Ian Shepherdson (Chief Economist and Founder)U.S.
Reversal of January spike in control sales delayed, not cancelled.
Kieran Clancy (U.S. Economist)U.S.
- The disappointing February core CPI number and calmer markets mean the Fed can hike next week…
- …Core services inflation remains too high and sticky for the Fed’s comfort.
- Today’s retail sales data likely will be soft, but won’t reverse the January spike.
Ian Shepherdson (Chief Economist and Founder)U.S.
Not good enough to stop the Fed hiking next week, provided markets are calm
Kieran Clancy (U.S. Economist)U.S.
Fall in stock prices to snuff out modest rebound in NFIB.
Kieran Clancy (U.S. Economist)U.S.
- The Fed’s first responsibility is financial stability, but if that is assured, their key worry right now is inflation...
- ...If markets are calm over the next week, a 25bp rate hike is still in the cards.
- The February core CPI data should be better than January’s numbers, but risks abound.
Ian Shepherdson (Chief Economist and Founder)U.S.
