Upgraded Growth, Sticky Inflation, and a Fed Tilting Toward Hikes
factors
2026-06-30 08:03:00
Related:Dallas Fed Manufacturing - 29 JunJuly FOMC meetingUnited States - core pce price indexUnited States - gdp growthUnited States - US Total Nonfarm Payrolls (All Employees)United States - youth unemployment rateUnited States Average Hourly EarningsUnited States Budget DeficitUnited States Dallas Fed Manufacturing ActivityUS Nonfarm Payrolls - 2 JulChinaGermanyJapanUnited StatesConsumer DiscretionaryConsumer Staples
Growth is firmer, but the inflation regime has flipped to supply-driven. Global growth is now seen at 3.2% in 2026 and 3.5% in 2027, lifted by the AI-driven export cycle in Asia and the US AI investment boom.
Why it matters: With downside labor risks fading and inflation sticky, the case has shifted from reversing 2024-25 cuts to potentially hiking — a regime change for rates.
Key US macro markers
+3.2%
+3.5%
+2.5%
+4.3%
+6%
The big picture
- ▸Labor stabilizing: June payrolls seen ~110k (private ~120k), a fourth straight gain, with the unemployment rate holding at 4.3% (risk of 4.2%). Breakeven pace may run above ~20k/month given tighter immigration.
- ▸Wages benign: AHE seen +0.3% m/m, average weekly hours 34.3 — supportive of consumption without being inflationary.
- ▸K-shaped dynamics: The top 10% of households drive ~23% of consumption; aggregate demand is less sensitive to lower-income stress, though card data hint the K may be narrowing.
- ▸Supply shocks rule: Global inflation has risen ~0.5pp since the conflict began; large energy shocks pass through more than small ones, with expectations easier to de-anchor post-pandemic.
- ▸Fiscal strain: US deficits seen staying around 6% of GDP; the interest-growth differential has flipped positive in many economies.
What's next: US payrolls (2 Jul), Dallas Fed manufacturing, and July FOMC will set the tone for the hike-or-hold debate.
Bottom line: Base case is a Fed on hold-to-hiking; a payrolls print >1.5 SD from consensus could be decisive.