US Macro: The Fed Has More Time, But Punters Have Not Abandoned the Hike

The most important change in the US macro picture this week is not that the inflation problem has disappeared.

It is that the Federal Reserve has been given more time.

A softer payroll report followed by relatively benign CPI and PPI readings has weakened the case for another immediate rate hike. But underneath that headline, the economy remains reasonably resilient, inflation is still above target, oil has re-emerged as a risk, equities are trading around record highs and the long end of the Treasury curve continues to resist the dovish interpretation.

That leaves the US in an unusual position.

The front end has repriced the timing of further tightening. It has not meaningfully repriced the destination.

That distinction is probably the most important macro signal coming out of this week.

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