US Federal Reserve

Since The Fed began its 'tightening cycle' in December 2015, the Treasury yield curve (2s10s) has flattened dramatically, tumbling back today towards cycle lows (and well below Trump-election-hope lows). What is perhaps more worrisome is the historical trend strongly suggests this trend is far from over and an inverted yield curve looms.

The trend is clear that Fed policy is running counter to growth expectations and all the hope that Trump offered has been erased completely.

At the end of February we first highlighted something extremely troubling for the global "recovery" narrative: according to UBS the global credit impulse - the second derivative of credit growth and arguably the biggest driver behind economic growth and world GDP - had abruptly stalled, as a result of a sudden and unexpected collapse in said impulse.

On Wedensday the FOMC will hike rates by another 25 bps - an event which the Fed Funds market prices in with near virtual certainty, while Goldman calls the rate increase "extremely likely" - and only a "tail" event like an extremely weak CPI report on Wednesday morning, hours ahead of the Fed announcement, has any chance of preventing  this outcome.

The following article by David Haggith was first published on The Great Recession Blog:

We just saw a major rift open in the US stock market that we haven’t seen since the dot-com bust in 1999. While the Dow rose by almost half a percent to a new all-time high, the NASDAQ, because it is heavier tech stocks, plunged almost 2%. Tech stocks nosedived while others rose to create new highs. Is this a one-off, or has a purge begun for the tech stocks that have driven the nation’s third-longest bull market?

After the Fed failed to spark any notable increase in aggregate demand despite keeping interest rates at zero for seven years, a group of economists is pressuring the central bank to rethink one of its most closely held-policy parameters.