Fed: Neither Hawkish nor Dovish

Research evidence excerpt

Fed: Neither Hawkish nor Dovish

was mostly due to a 25

decline in participation rate, with a drop in the number of people looking 155 10 8 4 3

(2)

(11) (14)for jobs (~720k). Employment to population ratio is at its lowest in five (15)(25)(5)

years. As for composition, ignoring whiplashes in leasure and hospitality, Healthcareemployment continues to be driven by healthcare and lower end services, & Construction TradeRetail Government Manufacturing Hospitality& Technology Activities Financialwith no sign of growth in manufacturing while IT and Finance continues Leaisre Education Information

to shrink. Hires rate remains depressed (3.3 vs 3.8) and quits rate hugs

1.9 (vs ~2). Earnings growth for non-supervisory employees dipped Source: Bloomberg; Macquarie Global Strategy

to 3.4%, in line with Fed's targets. Net/net, labor markets remain in a

Implied Fed Funds Rate (%) - hugging

suspended animation: no evidence of any significant labor replacement ~4%

or technological augmentation, with wages not driving excess inflation. 2. Implied Fed Fund Rate (%)

What does it mean for the Fed? We maintain that over the longer-term, 4.3 30-Sep-25 30-Dec-25 Latest

disinflation is likely to be a stronger force than inflation. But, in the shorter- 4.0

term, economies are whiplashed by policy responses (monetary, fiscal, 3.8

military) to technology and polarization that frequently lead to inflationary 3.5

spikes. If it was not for Trump 2.0 trade, immigration and war policies, it is 3.3

likely that inflation would have been already at or below Fed's targets and 3.02.8

we would have been debating disinflation. If there are no other dislocations, 2.5

energy spike will dissipate over 3-6 months. This is already reflected in Jul-26 Sep-26 Oct-26 Dec-26 Jan-27 Mar-27

trimmed inflation (e.g.