Need a nap? Check out Liberty Street Economics
June 19, 2023
–Friday featured new recent high SFRU3/SFRU4 at -124 (9469/9593). SFRZ3/Z4 still most inverted 1-yr at -142.5 (9481.5/9624) as Fed dots indicate 100 bps of ease over 2024 (5.6 to 4.6 FF target). Longer curve measures made new lows: 2/10 treasury spread at -95.6 and 5/30 at -14.4.
–Powell hones his message in front of Congress this week, House on Wednesday and Senate on Thursday.
–On Friday the NY Fed [Liberty Street Econ] released its DSGE Model Forecast. Which, as everyone knows, stands for Dynamic Stochastic General Equilibrium. (duh) It revised growth estimates sharply higher…but cited just ONE factor: “SPF [survey of professional forecasters] long-term inflation expectations have dropped by about 45 bps in Q1 23, relative to Q3 2022, a very large change by historical standards.”
Asked for further clarification, a representative from the NY Fed said, “Dude, it’s just a model.”
Appears to be in sync with NY Fed’s UIG, below
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From the NY Fed Underlying Inflation Gauge:
The UIG “full data set” measure for May is currently estimated at 3.5%, a 0.5 percentage point decrease from the current estimate of the previous month.
The “prices-only” measure for May is currently estimated at 3.0%, a 0.4 percentage point decrease from the current estimate of the previous month.
To the untrained eye, it certainly LOOKS like a turn…
https://www.newyorkfed.org/research/policy/underlying-inflation-gauge
