Global views & trends
The Federal Reserve’s evolving policy strategy framework
Struggling for some time now to hit its inflation mark sustainably, the Federal Open Market Committee may move to adopt average inflation targeting, or even temporary price level targeting, in its upcoming strategy review. Such a shift should steepen the Treasury curve, lower real interest rates, and support a widening of long-forward TIPS breakevens.
In the US, core CPI and PCE inflation should gently firm in 2019, with the contribution from shelter being supplemented by a growing contribution from cyclically-driven services inflation.
Problems are not stop signs, they are guidelines. Robert H. Schuller Let us consider the four GDP components – consumption (C), investment (I), government expenditure (G) and net exports (NX). The outlook for NX is clouded by the Sino-US trade conflict.
High levels of local concentration suggest employers have market power
If you can, help others; if you cannot do that, at least do not harm them. - Dalai Lama Summary The Sino-US trade tension risks escalating to a new cold war, which could cost not only China and the US, but also the world economy, dearly. Collateral damage to the global system could be another round of currency war in the short term with new volatility dynamics coming from China. If the end of the last Cold War fostered global economic integration, the beginning of the next one - between China and the US - will likely produce fragmentation, with long-term consequences on even technological innovation and climate change.