WS #15403
The US Federal Reserve is explicitly incorporating AI, tariffs, and energy costs into its inflation outlook, suggesting a more data-dependent and potentially hawkish stance if energy prices remain elevated. This comes as the US economy has expanded for 78 consecutive months, but credit markets are showing strain with high-yield CCC spreads hitting four-year highs. Concurrently, France is experiencing significant social unrest and fiscal distress, with government bonds underperforming other developed markets. This divergence highlights a global environment where US growth is resilient but fragile, and European stability is under threat.
Macroeconomic Divergence & Fed Policy
The US Federal Reserve is explicitly incorporating AI, tariffs, and energy costs into its inflation outlook, suggesting a more data-dependent and potentially hawkish stance if energy prices remain elevated. This comes as the US economy has expanded for 78 consecutive months, but credit markets are showing strain with high-yield CCC spreads hitting four-year highs. Concurrently, France is experiencing significant social unrest and fiscal distress, with government bonds underperforming other developed markets. This divergence highlights a global environment where US growth is resilient but fragile, and European stability is under threat.