A Steady Ship in Stormy Waters

Lending standards have tightened in the wake of the turmoil in the banking sector in the US and Europe. Market commentators are focused on whether tighter financial conditions will prompt the Fed to stop raising rates, raise them by less or start cutting them sooner rather than later. While there has been some disinflation in the US, in our view it is too early to consider this sufficient to warrant a pivot by the Fed, i.e., for the Fed to start cutting rates.