We systematically track the evolution of financial conditions and their underlying drivers. We intend to share regular updates of these systematic monitors with our donors on a more exclusive basis (so long as it does not compromise our public mission). This monitor is a reflection of how we think macroeconomic and policy dynamics are affecting financial conditions and, by extension, our assessment of the economic growth outlook.


  • Financial conditions remain and stable and expectations for Fed policy still seem substantially vulnerable to whiplash. Our inflation preview tees up a scenario that could push expectations towards more a more hawkish path for policy, one where the terminal rate is closer to 5.5%. Financial conditions do not appear to give high weight to this scenario and could look markedly different post-CPI. The Fed was already underbaking their growth and inflation projections in March, and with financial conditions now easing further and automobile inflation risks looming larger, we suspect that Fed expectations and financial conditions will not stay so accommodative to the growth outlook. The June FOMC meeting is individually pricing in a cut, despite an economy that still appears resilient and a Fed that is still posturing hawkishly.

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