growth has slowed markedly to just around 1% q/q AR over the past three
quarters – annual GDP growth declined from 3.3% y/y in Q1 15 to 1.2%
y/y in Q2 16.
2. Unemployment and underemployment rates have moved sideways for some time.
3. Wage growth has picked up but is still subdued.
4. PCE core inflation has moved sideways this year – it has only been at, or above, target for five months since 2008.
5. Inflation expectations (both market-based and survey-based) have moved lower.
6. ISM is the weakest it has been since 2010 and is in easing, not hiking, territory.
7. Weak business investments as non-residential investments have declined for three consecutive quarters.
8. The Fed has already tightened monetary policy equivalent to 330bp due to QE tapering and hiking expectations.
9. Most voting FOMC members have a dovish-to-neutral stance on monetary policy, in our view.
10. Do not always believe in Fed guidance, even if the Fed seems eager to hike.