Data released in the past week was essentially of the “come-and-go” variety, and impacts on rates were minimal. The Supreme Court’s tariff ruling was notable, of course. However, alternative-measure tariffs have been implemented. These alternatives too will likely face legal challenges. Meanwhile, legal challenges to obtain tariff reimbursements are also underway. In sum, it is likely to take time to discern fresh trends or resolution on this topic. In terms of the Fed policy, a near-term rate cut appears unlikely, and the market fully prices for a 25-bps cut in mid-to-late summer.

We are now experiencing a “higher for longer” phase in the interest-rate cycle, accompanied by an inversion in the short-to medium terms followed by a steepening (see following chart). The Fed is still in a restrictive posture, but market expectations indicate a near-term easing, however, uncertainty surrounding the potential of future heightened growth leading to elevated inflation is causing steepening at the longer-end of the curve…

Kristina Hooper discusses her outlook for the economy and markets for the remainder of 2023 and beyond. From recent challenges in the banking industry to inflation to earnings, 2023 has already faced a variety of uncertainties…