As of 2025-12-19, 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 slight steepening observed from the previous week.
- Credit conditions show spread compression, with a z-score indicating a position well below the long-run mean and a low percentile.
- The most notable shift from the past is the slight steepening of the yield curve.
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 indicating further acceleration. Inflation, as measured by the CPI, is at 3.03% year-over-year, with a slight increase over the past three months.
There is no change in the GI regime compared to the previous week, indicating a continuation of the current economic dynamics. This regime has often been associated with periods of robust economic activity and rising price levels.
Financial Conditions (F)
Financial conditions are currently labeled as tight, which suggests that borrowing costs and financial market conditions are more restrictive than usual. The federal funds rate is at 4.09%, and the two-year yield is at 3.48%. Compared to last week, the financial conditions score has moved slightly towards less tightness.
This tightness in financial conditions has often been seen in periods where central banks aim to control inflationary pressures, although no direct inference about central bank actions should be made.
Yield Curve (R)
The yield curve is currently flat, with a spread of 0.34 percentage points between the 10-year and 3-month yields. This flatness indicates that the difference between short-term and long-term interest rates is minimal, which can sometimes signal uncertainty about future economic growth.
Compared to the previous week, the yield curve has steepened slightly, moving from a spread of 0.37 percentage points. Historically, a flat yield curve has been associated with periods of economic transition, though not deterministically linked to future outcomes.
Credit (C)
Credit conditions are characterized by spread compression, with a high-yield spread level at 2.9%. The z-score of -1.04 indicates that the current spread is significantly below the long-run average, placing it in the 5.81 percentile of the past decade.
Compared to last week, there is a slight compression in spreads, as indicated by the lower high-yield spread level. This compression often reflects investor confidence in credit markets, although it should not be interpreted as a definitive signal of market stress or stability.
Uncertainty and How to Verify Going Forward
This report outlines 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 can provide insights into potential shifts in economic conditions.
Readers are encouraged to verify these metrics through reliable financial data sources and remain aware of the inherent uncertainties in economic analysis. This report does not assume responsibility for any investment decisions made based on its content.
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