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Slowdown in progress

Are the effects of #ratehikes in the US fully reflected on the economy? Not yet. Hikes have been so fast that it will take some time to be fully priced. Take for instance the average cost of debt for US treasuries: now it is 2.84%, almost half of the official rates, and we have an inverted yield curve, which means the average has a lot of room to go higher. And the US will need to refinance and issue new debt, because of the ramping deficit is experiencing. Corporate bonds, which take treasuries as basis for pricing, will reset as well at higher spreads, and the interest expense will go up. The spillover effect on unemployment or personal savings, among other metrics, is still in progress. Federal reserve officials are keeping the narrative that the US economy can avoid an economic recession despite the amount and speed of interest hikes. And the resiliency of the US economy is indeed incredible, but it’s difficult to see how the confluence of low growth, inflation and high debt doesn’t have a more negative impact that what we’ve seen.

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