Weekly Economic Update: March 18th, 2019
• Global growth continues to weaken, the trade dispute with China remains unsettled, and the economic impact of Brexit is uncertain. These issues have weighed on the economy which was reflected in a 15-basis point decline in the ten-year note during the first half of March.
• Average hourly earnings last month recorded the strongest annual growth rate of the expansion. The increase in wages should help consumer spending and sentiment going forward.
• Inflation continues to be mild with Core CPI down .1% to 2.1% YOY and headline inflation at 1.5% YOY Expectations for inflation continue to be under the Feds target rate of 2% for PCE
• Last week fixed-income investors increased the odds of a fed funds cut in 2019 to 30%. The Fed meets this week and will announce the results of their meeting on Wednesday. Investors will watch closely for any changes to the pace of balance sheet reductions and expectations for fed funds in 2019. The Fed is currently communicating two increases in fed funds during 2019. The market perceptions of the direction of fed funds are at odds with the Fed’s expectations.