Inflation is roaring along caused by government spending and energy policies, hurting the American middle class and lower-income groups.
Now we see the US Treasury 10Y-2Y flattening towards zero and the10Y-5Y curve slipping deeper into inversion as Q1 GDP growth slows to 0.867.
The US yield and dollar swap curves remain steeply upward sloping, but with the dollar swap curve around 120 basis points high than the Treasury yield at the 6-month tenor.
“With inflation at a four-decade high, Fed Chair Jerome Powell has set the central bank on course for a series of interest-rate increases this year. He has stressed the toll that price increases are taking on lower-income Americans.” (No duh, Jay!)
“We understand that high inflation imposes significant hardship, especially on those least able to meet the higher costs of essentials like food, housing, and transportation,” Powell said after the Fed’s interest-rate decision this month (of only a 25 basis point increase).
Philadelphia Fed’s Patrick Harker, in a speech Tuesday, said “One of our contacts, for instance, mentioned whopping membership fee increases at his golf club, suggesting this summer may be a good time to play at your local muni instead,” said Harker, a former University of Delaware president and dean of the Wharton School of the University of Pennsylvania.
Perhaps Harker wins the Derek Zoolander award for his remarks on how the rich are impacted by inflation too.