Delivering Global Macro Investment Insights

DeSaque Macro Research

DeSaque Macro Research Limited was formed by Said DeSaque in April 2012 with the view to delivering global macro investment insights aimed at providing new ideas to clients.

Said DeSaque has over 26 years of experience working as a professional economist in financial services. Prior to establishing DeSaque Macro Research, Said held positions as Senior Economist at Robert W Baird and William Blair. He began his career as a graduate at PaineWebber in 1986, where he eventually became Head of the London Economics Department.

Said takes a very keen interest in international relations, along with their implications for economic development. His research interests include the economic transformation of China and its implications for global capital markets, particularly in the United States. He is a member of Chatham House in London.

The US economy and capital markets have historically been Said’s main focus of attention. He frequently presents his views to institutional investors in diverse geographic locations. In recent years, Said has also been carefully monitoring economic developments in Asia, particularly China and Japan.

Paranoid Fed: Wary of Downside Economic Risks and Gambles on Limited Positive Surprises by 2023

Reasons Why the US Economic Recovery Should Defy the Doomsayers

Fed Will Tolerate Tighter Labour Markets as US Equity Bulls Embrace Another Roaring 20's Outlook

Fed's Policy Conduct to Embrace Greater Flexibility, but Ambiguities Require Quick Resolution

Global Economist, DeSaque Macro Research

Said Desaque

Global Economist

Macroeconomics

<div>The Federal Open Market Committee (FOMC) has not avoided potential communication pitfalls by failing to convey the prospective length of current policy settings in their pursuit of higher inflation. Although regional Federal Reserve Bank Presidents are in a minority voting position on the FOMC, their tendency to speak to the media more frequently can inadvertently impart conflicting messages about the future path of policy.</div>
<div></div>
<div>The FOMC needs to clarify the magnitude and duration tolerance of any inflation overshoot either before or after 2023 Q4, because, otherwise, investors will simply conclude that a higher policy rate is inevitable. Meanwhile, the role of asset purchases needs to defined in order to assuage investors that the onus of policy adjustment will not fall solely on changing the federal funds rate.</div>
<div></div>
<div>The Fed's baseline scenario for the economy and policy rate outlook would imply a flat yield curve until 2023 Q4, largely driven by their assessment of meaningful downside risks. Upside surprises remain significant, thereby implying the prospect of a steepening yield curve that could impact interest rate sensitive sectors of the economy.</div>
<div></div>
<div>Near-term positive surprises for the economy emanate from cyclical sectors that have hitherto recovered very rapidly over the past few months. Rising job openings, as COVID-19 shutdown risks recede, from a high outstanding level could produce a rapid and broad-based decline in unemployment over a much shorter-than-expected time horizon.</div>
<div></div>
<div>Future wage inflation trends, as the labour market tightens, will be critical in determining the prospect of inflation breaching its 2% target and, consequently, provoking a policy response from the Fed.   </div>

The Federal Open Market Committee (FOMC) has not avoided potential communication pitfalls by failing to convey the prospective length of current policy settings in their pursuit of higher inflation. Although regional Federal Reserve Bank Presidents are in a minority voting position on the FOMC, their tendency to speak to the media more frequently can inadvertently impart conflicting messages about the future path of policy.

The FOMC needs to clarify the magnitude and duration tolerance of any inflation overshoot either before or after 2023 Q4, because, otherwise, investors will simply conclude that a higher policy rate is inevitable. Meanwhile, the role of asset purchases needs to defined in order to assuage investors that the onus of policy adjustment will not fall solely on changing the federal funds rate.

The Fed's baseline scenario for the economy and policy rate outlook would imply a flat yield curve until 2023 Q4, largely driven by their assessment of meaningful downside risks. Upside surprises remain significant, thereby implying the prospect of a steepening yield curve that could impact interest rate sensitive sectors of the economy.

Near-term positive surprises for the economy emanate from cyclical sectors that have hitherto recovered very rapidly over the past few months. Rising job openings, as COVID-19 shutdown risks recede, from a high outstanding level could produce a rapid and broad-based decline in unemployment over a much shorter-than-expected time horizon.

Future wage inflation trends, as the labour market tightens, will be critical in determining the prospect of inflation breaching its 2% target and, consequently, provoking a policy response from the Fed.   

Faster US Economic Recovery: Raising Pressure on the Fed for Better Financial Market Guidance