As of 2025-12-18, Today’s GI regime is Growth Acceleration × Inflation Reacceleration.
Financial conditions are tight, the yield curve is flat, and credit conditions show spread compression.
- The Growth Acceleration × Inflation Reacceleration regime has historically tended to indicate robust economic activity with rising price pressures.
- Financial conditions remain tight, with a slight movement towards less tightness compared to last week.
- The yield curve is flat, with a marginal steepening observed since the previous snapshot.
- Credit conditions show spread compression, with the high-yield spread in the lower 7th percentile, indicating relatively favorable credit conditions.
- The most notable shift is the slight loosening in financial conditions, as indicated by the lower score.
Growth × Inflation (GI)
The current regime of Growth Acceleration × Inflation Reacceleration suggests a period where economic growth is picking up alongside increasing inflationary pressures. The year-over-year growth in industrial production stands at 1.75%, with a three-month change of 1.12%, indicating a robust growth trajectory. Inflation, as measured by the year-over-year change in the consumer price index, is at 3.03%, with a three-month change of 0.12%, suggesting persistent inflationary pressures. There is no change in the regime compared to the past snapshot, indicating stability in the growth and inflation dynamics.
Financial Conditions (F)
Financial conditions are currently tight, which typically implies higher borrowing costs and potentially restrictive access to capital. The federal funds rate is at 4.09%, and the two-year yield is at 3.46%. Compared to the past, the financial conditions score has moved slightly towards less tightness, as indicated by a decrease in the score from 0.88 to 0.86. This suggests a marginal easing in financial conditions, although they remain tight relative to historical norms.
Yield Curve (R)
The yield curve is currently flat, with a spread of 0.30 percentage points between the 10-year and 3-month yields. This flatness often reflects uncertainty about future economic growth and inflation. Compared to the past, the yield curve has steepened slightly, as the spread has increased from 0.32 to 0.30 percentage points. This change may suggest a slight shift in market expectations regarding future economic conditions, although the overall flat shape remains.
Credit (C)
Credit conditions are characterized by spread compression, with the high-yield spread at 2.95%. The z-score of -0.99 indicates that the spread is below the long-run average, and the percentile rank of approximately 7% places it in the lower range of the past decade. Compared to the past, there has been further compression, as the high-yield spread has decreased from 2.88 to 2.95. This suggests relatively favorable credit conditions, with reduced risk premiums in the high-yield market.
Uncertainty and How to Verify Going Forward
This report reflects conditional tendencies based on current data, not forecasts. Key metrics to track include the GI label and its core values, the financial-conditions score, the yield-curve spread, and the high-yield spread level and percentile. Monitoring these indicators over the coming months will provide insights into potential shifts in economic conditions. Readers should remain vigilant and consider these metrics as part of a broader analysis, acknowledging that this report does not constitute investment advice or predictions.
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