high inflation

Weekly Update

Will It Be Different This Time?

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Published August 23, 2024

 

The market is eagerly awaiting the commencement of Federal Reserve interest rate cuts next month. The sharp, nonstop rebound from the August selloff provides ample evidence of investor enthusiasm for the upcoming cuts. Market interest rates have fallen back to where they were 18 months ago. The chart below shows how the yield curve has changed over the past year. The left side of the curve displays very short-term rates (1 month to 1 year) which are driven by the Fed. They have been anchored to the Fed’s 5.25% short-term target rate while the longer-term rates have fallen notably.

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Weekly Update

Looking at the Supply of Money

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Published March 10, 2023

 

Though interest rates get all the headlines, changes in the supply of money can have substantial impacts on the economy and asset prices. Below is Delta’s analysis of changes in the supply of money and how that might impact inflation.

“The January money supply declined by 1.7% versus a year ago. Money supply (M2) is a measure of money including coins, currency, check and savings deposits, travelers checks and money market deposit accounts. This is both the biggest yearly decline and the first time ever it has contracted in consecutive months. The monthly rate of change has been falling consistently since mid-2021 when it peaked at a 27% growth rate. (more…)

Weekly Update

Yield Curve Inverts but Recession Still a Ways Off

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Published April 8, 2022

 

The recent inversion in the yield curve has certainly generated a lot of headlines. The inversion occurs when short-term interest rates become higher than long-term interest rates. The driver of the inversion is usually a Federal Reserve raising rates while investors are skeptical about the long-term economic strength. Thus, the interest rate curve reflects a sort of temporary spike in rates. This inversion often suggests a recession is upcoming as the economic cycle has overheated to the point where the Fed has had to step in to slow it down. (more…)