US Overheating Risk

The Zarnowitz Rule states that the steeper the downturn, the sharper the upturn. This was on hold while Covid-related restrictions were in place, but now we should expect to see it in full flight, turbocharged by fiscal stimulus. Overheating risks are rising The US...

Tracking the US’s Labour Market Recovery

The US labour market has pockets of tightness. However, it’s unlikely we’ll see rapidly rising household inflation-expectations until we see higher low-skilled wage growth and rising ex-transfer incomes Our indicators show that at this relatively early stage in the...

Food Inflation Tailrisks

Food prices are correlated with EM inflation surprises. The current surge in soft grain prices should be monitored in case it spills over into general inflation expectations Food inflation can have outsized impacts on inflation expectations due to the higher frequency...

Hidden Risks from ECB’s Pandemic Tools

The ECB’s policy response to the Covid crisis has been game changing, but has also added to the list of risks that undermine financial stability. The disruption to wholesale bank funding is a case in point In the midst of an unprecedented economic contraction, it is...

Don’t Fear the Rise in Yields

The last few weeks have seen US yields breakout to the topside of the tight range they have been trading in. The market narrative is that yields have been boosted by more clarity on the US election – a Democrat win with a mooted $3.5 trillion stimulus package in...

Pandemic a Potential Trigger for QE in EM

The unparalleled nature of the response to the COVID-19 crisis – indiscriminately triggering sudden-stops across economies – suggest that some emerging markets could be closer to crossing the Rubicon into full-blown QE. Many EM central banks already purchase...