Macro Pulse

Having begun 2023 on a more upbeat footing, the mood in financial markets has continued to sour over the past few weeks. Incoming data suggest that labour markets are too tight and that inflation is too high for comfort, especially for central banks. And this combination has added to the case for further policy tightening. Most of our charts this week home in on these inflation and policy themes.

Financial markets have been pricing in tighter-for-longer monetary policy settings in recent weeks thanks to some firmer-than-expected US data. And this is now reversing the shift from a hard to a soft landing consensus that had begun to form in January. Our charts this week, however, turn the focus back onto some of the more positive trends that have established themselves in recent times.

The shift toward a soft landing consensus that had been in vogue since the start of this year has suffered some setbacks over the past two weeks thanks to last week’s strong US jobs data and this week’s firmer-than-expected US CPI report. We pick up on this theme in some of our charts this week. 

Last Friday’s much stronger-than-expected US jobs report has set the tone for financial markets in the past few days. But it has not yet meaningfully derailed the more upbeat narrative concerning inflation and monetary policy that’s been in vogue since the start of this year. Listen now for the full analysis.