Global Macro Chart of the Day (#118): Over 100bp of US growth support from financial conditions

Research evidence excerpt

Global Macro Chart of the Day (#118): Over 100bp of US growth support from financial conditions

Global Research

7 July 2026ab

Global Macro Chart of the Day Economics

Global(#118): Over 100bp of US growth support from

financial conditions Arend Kapteyn

Economist

arend.kapteyn@ubs.com

+44-20-7567 0531

The Fed's Financial Conditions Impulse on Growth is signalling strong tailwinds

There are many ways to measure financial conditions, and the Federal Reserve System

itself monitors several different indices. The Chicago Fed's National Financial Conditions

Index (NFCI) is the broadest, combining 105 measures of risk, credit and leverage across

money, debt, equity and shadow-banking markets in a dynamic factor model. The St.

Louis Fed Financial Stress Index (STLFSI) and the Kansas City Financial Stress Index

(KCFSI), by contrast, use principal-component approaches. The STLFSI draws on 18

weekly indicators, mainly interest rates and yield spreads, while the KCFSI is based on a

narrower set of financial variables aggregated at a monthly frequency. Despite their

methodological differences, all three measures currently indicate accommodative

financial conditions. Each stands around 0.5–0.8 standard deviations below its historical

norm, pointing to lower-than-average levels of financial stress and greater-than-normal

support for economic activity.

The focus of today's chart, however, is the Federal Reserve Board's Financial Conditions

Impulse on Growth (FCI-G). Unlike the other indices, which measure the level of financial

stress, the FCI-G estimates the direct impact of financial conditions on GDP growth. It

combines changes in seven key variables—including policy rates, bond yields, equity

valuations, the dollar and house prices—and weights them according to their estimated