U.S. Review
Labor Market is Strong but Loosening - Data this week broadly added evidence that the labor market is loosening. Employers added jobs at the slowest pace since 2020 in March, job openings fell and an upward trend in initial jobless claims has emerged. The weaker direction suggests the end of the Fed's tightening cycle may be in sight.
Global Review
Policy Divergence Down Under - The Reserve Bank of Australia (RBA) paused its rate hike cycle this week, holding its policy rate at 3.60%, citing the cumulative tightening to date, evidence that inflation has peaked and a cautious outlook for consumer spending. We expect the current policy rate to be the peak for this cycle and do not expect RBA easing until well into 2024. The Reserve Bank of New Zealand (RBNZ) was more hawkish, raising its policy rate 50 bps to 5.25%, saying that inflation is still too high and persistent. We expect some modest further tightening from the RBNZ, and we see a final 25 bps hike to 5.50% at the May monetary policy announcement.