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FICC Focus

Fed Easing Cycles and Unsustainable Fiscal Policy: Macro Matters

Jul 25, 2024
Lara Rhame, the chief US economist at FS Investments, joins Ira Jersey and Will Hoffman to tackle the current state of the economy. She discusses how economic resilience is shaping Federal Reserve policy decisions. The trio delves into the potential impacts of upcoming U.S. elections on Treasury markets and the effects of fiscal policy on long-term interest rates. They also explore the implications of sustained deficits and how robust economic indicators contrast with consumer sentiment, revealing a complex landscape for investors.
24:09

Episode guests

Podcast summary created with Snipd AI

Quick takeaways

  • The U.S. economy shows strong momentum driven by consumption and investment, suggesting sustained growth without imminent contraction.
  • Uncertainty in fiscal policy, shaped by upcoming elections, raises concerns about long-term sustainability and impacts on the Treasury market.

Deep dives

Outlook on Economic Growth

The overall economy is characterized by strong performance across key sectors such as household consumption, business investment, and government spending, which are contributing to solid economic momentum. Despite expectations for a gradual slowdown, core domestic demand remains robust, with final sales to domestic purchasers exceeding 2.5% growth. Consumption patterns, particularly in the services sector, indicate continued spending habits that will help sustain economic expansion, even as some areas, like durable goods, experience fluctuations. This ongoing growth is viewed as healthy, with employment and wage growth supporting consumer spending levels, suggesting no imminent contraction in the economy.

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