Quarterly Economic Report, Q3 2021
Key takeaways
01
Growth and inflation expectations continued to accelerate
The recovery continues as US economic activity tries to normalize in a post vaccine world.
02
Economy recovering stronger than expected
With economic conditions improving stronger than expected, the Fed was slightly more hawkish.
03
Yield curve divergence
Front-end yields continued to anchor low while the rest of the curve steepened.
Inflation: Swift shift
Inflation picked up significantly in Q2 with core Personal Consumption Expenditure (PCE) at 3.4% and Consumer Price Index (CPI) at 5% in May.
The Federal Reserve’s more hawkish tilt
Economic conditions have been improving faster than expected, and the FOMC has expressed concerns about inflation.
Central Banks
The market expects liftoff for the fed funds rate in the US to be late 2022 with other central banks preserving a more accommodative policy into 2026.
Yield Curve
Long-end yields rose in Q1 on higher growth and inflation expectations. In Q2, the 10-year yield rallied with the re-emergence of foreign investors.
Written and researched by SVB experts
