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.

The Sum of All Fears: Inflation! Inflation!

Fed Credibility and Risks to Achieving Dual Mandate: Facing Ominous Comparisons to the Late-1960s

Sustained Upside Surprises to US Economic Growth? Big-Ticket Spending Recoveries Suggest Otherwise

Outlook for US Treasuries and Fed Policy: Beware the Lingering Legacies of Deflationary Psychology

Congenial Treasury-Fed Nexus Under Yellen Places Spotlight on Fiscal Policy Outlook

Equity Bulls Eye New Treasury-Fed Nexus Under Yellen, Despite Rollback of Emergency Facilities

Global Economist, DeSaque Macro Research

Said Desaque

Global Economist

Macroeconomics

The Federal Open Market Committee (FOMC) got their wish for significant fiscal stimulus in 2021, but this has raised issues with bond investors about the credibility of members' economic forecasts and, consequently, forward guidance. Economic growth has been revised up sharply while inflation is now expected to overshoot its 2% target in 2021, but both are expected to subsequently cool. Short-term interest rate expectations look relatively well-anchored for the next three years, but the FOMC will still need to persuade investors to be patient in the interim and to accept that their forward guidance is credible.
Last September, the FOMC announced an important change in the assessment of labour market conditions by embracing socio-economic inclusion, thereby raising the risks of overheating. The FOMC will assess metrics that are usually overlooked by bond investors to assess whether improved labour demand is well-dispersed across socio-economic groups. The gap in labour market conditions between white and African American workers narrowed significantly during the previous expansion relative to history and, consequently, this raises the assessment bar for the FOMC to surpass.
The flattening of the Phillips Curve during the previous expansion did not persuade the Fed to test the economy's speed limit, but the FOMC's new economic forecasts suggest a potential change of heart by allowing the unemployment rate to dip below its estimated natural rate without raising the federal funds rate. Some commentators believe the Fed will use the pandemic to justify dropping the Phillips Curve framework by asserting that any increase in inflation over the next few years will be transitory.
Subdued trends in housing rents have recently acted as a headwind to higher inflation due to its critical role in the calculation of the much larger owner-occupied housing component. Tight supply-demand conditions in the owner-occupied market and low rental vacancy rates could, however, push up rental inflation as unemployment falls, thereby triggering an acceleration in inflation that bond investors would fear.

The Federal Open Market Committee (FOMC) got their wish for significant fiscal stimulus in 2021, but this has raised issues with bond investors about the credibility of members' economic forecasts and, consequently, forward guidance. Economic growth has been revised up sharply while inflation is now expected to overshoot its 2% target in 2021, but both are expected to subsequently cool. Short-term interest rate expectations look relatively well-anchored for the next three years, but the FOMC will still need to persuade investors to be patient in the interim and to accept that their forward guidance is credible.
Last September, the FOMC announced an important change in the assessment of labour market conditions by embracing socio-economic inclusion, thereby raising the risks of overheating. The FOMC will assess metrics that are usually overlooked by bond investors to assess whether improved labour demand is well-dispersed across socio-economic groups. The gap in labour market conditions between white and African American workers narrowed significantly during the previous expansion relative to history and, consequently, this raises the assessment bar for the FOMC to surpass.
The flattening of the Phillips Curve during the previous expansion did not persuade the Fed to test the economy's speed limit, but the FOMC's new economic forecasts suggest a potential change of heart by allowing the unemployment rate to dip below its estimated natural rate without raising the federal funds rate. Some commentators believe the Fed will use the pandemic to justify dropping the Phillips Curve framework by asserting that any increase in inflation over the next few years will be transitory.
Subdued trends in housing rents have recently acted as a headwind to higher inflation due to its critical role in the calculation of the much larger owner-occupied housing component. Tight supply-demand conditions in the owner-occupied market and low rental vacancy rates could, however, push up rental inflation as unemployment falls, thereby triggering an acceleration in inflation that bond investors would fear.

US Treasury Investors and Inflation: Fed Attempts to Teach the Virtues of Patience