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Inflation/Deflation

Brazil: Stuck Between A Rock And A Hard Place

Brazilian policymakers are stuck between a rock and a hard place. There is no combination of fiscal and monetary policies that can assure decent growth, on-target inflation, a stable exchange rate, and public debt sustainability. We recommend investors maintain an underweight allocation to Brazilian fixed-income markets versus their EM peers and continue shorting BRL versus MXN. We have been bearish on the Bovespa in absolute terms and are now downgrading Brazilian stocks from neutral to underweight within an EM equity portfolio.

Emerging Markets Strategy by Juan Egana, Arthur Budaghyan
The Fed Remains In Wait-And-See Mode
The Federal Reserve held rates at 4.25%-to-4.5% as expected, and slowed down the pace of quantitative tightening. The FOMC remains comfortable waiting and assessing the impact of recent and upcoming policy changes. The dots reflected a more stagflationary…
Daily Insights by Felix Vezina-Poirier
Analysis Paralysis

The market reaction to this afternoon’s Fed meeting looks overdone. Investors could be in for a hawkish surprise when it becomes apparent that the Fed won’t ease policy into higher tariff-driven inflation prints.

US Bond Strategy by Ryan Swift
Canadian Inflation Distorted By Tax Break Expiry
February Canadian headline inflation was stronger than expected, rising to 2.6% y/y from 1.9% in January. The Bank of Canada’s core measures were also slightly hotter than expected, both rising to 2.9% from 2.7% a month prior, near the top of the BoC’s…
Daily Insights by Felix Vezina-Poirier
Rising Inflation Expectations Will Keep The Fed On The Sidelines
The preliminary March University of Michigan Consumer Sentiment Index missed estimates, falling to 57.9 from 64.7. The decrease came from both the assessment of current conditions and expectations, with the latter falling almost 10 points. Measures of 1-year…
Daily Insights by Felix Vezina-Poirier
Cool PPI Points To Hotter PCE
The February US Producer Price Index came in below estimates, with the headline measure showing no monthly change and standing at 3.2% y/y. Core PPI (excluding food, energy, and trade services) was also cooler than expected, coming in at 0.2% m/m (3.3%…
Daily Insights by Felix Vezina-Poirier
US: Inflation Is A Lagging Indicator
The February US CPI came in cooler than expected. Headline inflation decelerated to 0.2% m/m (2.8% y/y), as did core which now stands at 3.1% y/y. Core services inflation declined while core goods inflation was roughly unchanged.  Inflation is headed…
Daily Insights by Felix Vezina-Poirier
BoC: Focus On Inflation Expectations
The Bank of Canada cut by 25 bps to 2.75% as expected. This seventh consecutive cut brings the policy rate further into neutral territory, estimated to be in the 2.25%-to-3.25% range. The BoC is in a tough place. The trade war will ultimately be…
Daily Insights by Felix Vezina-Poirier
The Worst Of Both Worlds

A falling stock market and sticky bond yields represent the worst of both worlds for investors. We interrogate why bond yields haven’t dropped more given the large selloff seen in equities.

US Bond Strategy by Ryan Swift
China’s Deflationary Pressures Remain Strong
China’s February consumer prices fell 0.7% y/y after expanding on an annual basis in January. Producer price deflation stood at -2.2% y/y, roughly unchanged from a month prior. China’s first quarter data is heavily influenced by seasonality, as the shifting…
Daily Insights by Felix Vezina-Poirier

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